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Early in 2011, many investors and economists were talking about central bank 'exit strategies', economic recovery and a third year to the bull market in risk.

I recall hearing many investors and analysts make the following predictions:

  • After two years of double-digit returns, many expected another positive year for the S&P 500 (SPY).
  • With interest rates near record-lows, many thought it a 'no-brainer' to short long term U.S. Treasuries (TLT).

  • Many expected world GDP growth to be driven by emerging markets, and were thus long emerging market equities (EEM).

  • With risk assets expected to rally and real economic growth driven by emerging markets, many investors expected the U.S. dollar to depreciate and either shorted a dollar index ETF (UUP) or simply bought a short dollar ETF (UDN).

  • After years of decline, many investors thought natural gas had finally bottomed (GAZ).

  • Many analysts expected the gold (GLD) bull market to finally shift into reverse.

So what really happened in 2011? In a nutshell, 2011 was a year of worry, volatility and surprises.

Below, I provide a performance recap for various sectors, asset classes, currencies and commodities. It turns out 2011 was a year that defied expectations in many ways.

How many people were predicted long term government bonds to significantly outperform in 2011?

2011 Sector Performance Performance Potentially Similar ETF
Utilities 13.10% (XLU)
Healthcare 10% (XLV)
Services 4.20% n/a
Consumer Goods 2.60% (XLP)
Technology -3.60% (XLK)
Conglomerates -3.90% n/a
Indusrial Goods -4.90% (XLI)
Basic Materials -10.40% (XLB)
Financials -18.80% (XLF)
2011 Capitalization Performance Performance Potentially Similar ETF
Large -4.40% (NYSEARCA:SPY)
Mid -4.60% (MDY)
Mega -6.60% (DIA)
Nano -8.30% n/a
Small -9.10% (IJR)
Micro -16.10% (IWC)
2011 Index Price Performance Performance Potentially Similar ETF
S&P 500 -0.02%
Shanghai -22.42% (FXI)
Nikkei 225 -17.34% (EWJ)
Hang Seng Index -19.27% (EWH)
Euro Stoxx 50 -18.41% (FEU)
S&P/TSX Composite Index -11.01% (EWC)
2011 Currency Performance Performance Potentially Similar ETF
EUR/USD -1.30% n/a
USD/JPY -5.91% n/a
USD/CAD 1.64% n/a
USD/CNY -4.62% n/a

Note: currency ETFs do exist, but without detailed explanation of how they work I thought it prudent to leave out the tickers.

2011 Commodity Performance Performance Potentially Similar ETF
Gold 10.19% (NYSEARCA:GLD)
Oil 6.33% (DBO)
Natural Gas -42.21% (NYSEARCA:GAZ)
Silver -9.75% (SLV)
Copper -19.56% (JJC)
Wheat -23.89% (JJA)
Soybeans -5.81% "
Corn 15.43% "
2011 Bond ETF Performance Performance ETF Used in Calculation
Long Term US Treasuries 30.25% (NYSEARCA:TLT)
iShares Aggregate Bond Fund 4.68% (AGG)
TIPS 9.28% (TIP)
Investment Grade 5.17% (LQD)
High Yield -0.78% (HYG)

It turns out that long term U.S. Treasuries blew the lights out in 2011. Also, Gold logged another positive year, U.S. equities were flat (despite tremendous volatility) and natural gas tanked. So much for the predictions.

The moral of the 2011 story: take every forecast for 2012 with a large dose of skepticism.

Happy New Year!

Disclaimer: Sources: Google, Finviz, CNBC. This is not advice. While Plan B Economics makes every effort to provide high quality information, the information is not guaranteed to be accurate and should not be relied on. Investing involves risk and you could lose all your money. Consult a professional advisor before making any investing decisions.

Source: 2011 Winners And Losers: Sectors, Asset Classes, Commodities