2011 was a difficult year for countless retail investors, money managers, hedge funds and just about everyone trading in the global markets. The S&P 500 Index returned a paltry 2.1% (counting dividends) and market volatility and economic uncertainty drove investors into U.S. Treasuries despite record low yields.
The new trading year does not mean last year's problems have been excised from investors' minds, and for some strategists, like Charles Schwab's Liz Ann Sonders, 2012 presents a lot more opportunities for investors. She tells The Daily Ticker's Daniel Gross that the "rampant volatility" that marked 2011 was "unique" and predicts the wild swings that shook the S&P and Dow in 2011 will ease this year, giving spooked investors more confidence to place their cash in equities, specifically cyclically-sensitive sectors. Dividend plays may continue to provide comfort and peace of mind to some investors, but as the U.S. economy improves (which Sonders believes it will), the risk on/risk off trading environment will fade and investors will move money out of fixed income.
Commodities have started 2012 strong, with oil and gold moving sharply higher in just the first few trading days of the year, signaling a trend that won't reverse in the near future, according to Sonders. What's different about commodities this year, she says, is the differentiation investors must make — copper versus oil, soft commodities versus hard commodities. Buying a basket of sundry commodities won't suffice this year as it has previously, says Sonders.
While she won't give a year-end (or even quarterly) target for the S&P 500 and the Dow, Sonders does paint an optimistic picture, predicting that lower correlations, reduced volatility and an improving housing market will lead to better returns for investors in 2012.