Stock markets around the globe stumbled in the second quarter, primarily due to sovereign debt concerns in Europe and signs of slowing economic growth in the U.S. and major emerging markets. From its April 2 peak to its low point on June 1, the S&P 500 Index fell by 9.9%. Smaller companies and foreign stocks suffered larger corrections as investors perceived these sectors as having more exposure to a weakening economic environment. A strong 4.0% advance in June for the S&P 500 helped to cut the quarter's losses.

International stock markets suffered the greatest damage during the quarter as Europe's economy continued to stall and interest rates for Spanish and Italian government bonds rose to levels that would make it difficult to finance their national debt. While still growing, emerging market economies slowed from the rapid pace of the last several years.

The table below shows total returns

Last week produced a number of weaker-than-expected economic indicators, the most important of which, the May employment report, jolted the markets on Friday. Job growth for May was just 69,000 versus a consensus estimate of 150,000. The S&P 500 Index fell 2.5% on Friday and has declined 10.0% from its 52-week high on April 2, 2012. Year-to-date returns for the S&P 500 are still positive, at 2.6%. Virtually all of the other major U.S. and foreign indices have fared worse. The MSCI EAFE International Index has lost 7.1% in 2012, and has declined 24.0% in the past year.

While the employment report, coupled with disappointing figures for pending home sales and consumer confidence have raised concerns that the U.S. economy is slowing, most of the current correction has been attributed to negative news from Europe. Worries about the economies of Greece, Spain, and Italy and the major banks within those

Equity markets rallied strongly in the first quarter of 2012 as the US economy continued to show signs of improvement and fears of a debt crisis in Europe subsided. The S&P 500 Index generated a 12.6% total return for the quarter. It was the best quarterly performance since the third quarter of 2009 and the strongest first quarter since 1998. It was the second quarter in a row which produced double-digit gains. In the past six months the S&P 500 has risen 25.9%. However, those gains primarily represent a recovery from bear market territory. As can be seen in the table below, returns for the one-year period are single digit for S&P 500 and negative for the other indices.

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The mixed performance and wild swings in equity prices over the last 12 months primarily reflect disappointing economic results for most major economies. According to the Wall Street

The S&P 500 Index closed 2011 at almost the exact level that it began the year. As the graph below indicates, stocks spent most of the first half of 2011 in positive territory and most of the second half under water. In March, markets were initially jolted by the Japanese earthquake and tsunami, but then began to recover as the damaged reactors came under control. However, the dysfunctional political process in the U.S. regarding the budget and debt ceiling in July led to a downgrade of U.S. debt and an almost 20% decline in stock prices. At the same, time the sovereign debt crisis in Europe caused fears of a Lehman-type crisis in which the default of sovereign debt could spread to from country to country as well as cause defaults of European banks. When the market bottomed on October 4, many investors believed that another deep global recession was

Concerns over slowing economic growth across the globe produced a significant correction for virtually all major stock markets in the third quarter. The S&P 500 (SPY) Index lost 13.9% during the third quarter and has lost 17.1% from its 2011 high, which occurred on April 29. It was the worst third quarter performance for the S&P 500 since 1928, according to Bespoke Investment Group. The Russell 2000 Index (IWM) of small companies and the MSCI EAFE (EFA) International Index suffered even greater third quarter losses of 21.9% and 19.6%%, respectively. The U.S. stock market has retreated for five consecutive months, with each month’s decline becoming progressively greater.

The stock market finished 2010 strongly, with the S&P 500 Index producing total returns of 6.7% for the month of December and 10.8% for the fourth quarter. The S&P 500 rose on 17 of 22 trading days in December, making it the best December since 1991. The strong finish helped to turn 2010 into a very good year for equity investors. As shown in the following table, the S&P 500 Index generated returns of 15.1% for 2010, while the Russell 2000 Index of small companies produced returns of 26.9%. The MSCI EAFE international index lagged with returns of just 4.9%, due to significant problems in a number of countries, most notably Greece, Ireland, Spain and Portugal.

As has been the trend in 2010, stocks continued to display a high degree of volatility during the third quarter. After rallying 7.0% in July, then falling 4.5% in August, the S&P 500 Index had its best September since 1939, advancing by 8.9%. Ironically, on average, September has been the worst month of the year for stocks. According to the Stock Trader’s Almanac, since 1950, the S&P 500 Index has declined by an average of 0.7% during September. The strong September performance helped to push the year-to-date returns into positive territory, albeit, a modest 3.9%. For the third quarter, the S&P 500 Index generated total returns of 11.3%.

The performance of several major indices over various times frames is summarized below.

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Following four quarters of strong performance, the stock market fell sharply in the second quarter of 2010. After reaching a 19-month high on April 23, the S&P 500 Index declined by 15.4% to finish the quarter with an 11.4% loss. The other major stock market benchmarks experienced similar performances as summarized in the table below.

Several days ago I published an article on Seeking Alpha (NASDAQ's '60%' Rule: Arbitrary and Suspicious) which discussed the decision of US Exchanges to cancel certain trades which occurred last Thursday afternoon during the “Flash Crash”.

I was subsequently contacted by a representative of NASDAQ OMX Group (NDAQ). I was asked by the representative to amend my Seeking Alpha article to state that all US markets participated in determining the “60% ruling” regarding the cancellation of trades last Thursday. In addition, the NASDAQ representative noted that a Security and Exchange Commission employee monitored the call in which the decision was made.

In my article I quoted the NASDAQ’s press release stating that “NASDAQ has coordinated a process among US Exchanges…” In subsequent references to the decision makers regarding this matter, I simply referred to NASDAQ. From the press release, I had made the conclusion that NASDAQ

On Thursday, NASDAQ announced that it was cancelling certain trades which occurred during a period when the stock markets appeared to be in free fall. The press release read,

NASDAQ has coordinated a process among US Exchanges and therefore, pursuant to rule 11890(b), NASDAQ, on its own motion, will cancel all trades executed between 14:40:00 and 15:00:00 greater than or less than 60% away from the consolidated last print in that security at 14:40:00 or immediately prior. This decision cannot be appealed.

There are so many amazing aspects to this episode. The media is focusing on the fact that some trades occurred at cents on the dollar, as in the case of Accenture (ACN) and Exelon (EXC). But what is shocking to me is how NASDAQ has arbitrarily determined which trades will stand and which get cancelled.

In this case they are playing god with investors’ money, in what appears

Stock markets in the U.S. continued their strong recovery during this year’s first quarter. The S&P 500 Index generated returns of 5.4% for the quarter ending March 31, 2010 and has advanced 75.8% since the bottom of the market on March 9, 2009. Clearly, those investors who stayed the course during the market panic have seen a substantial recovery in their portfolios over the past year. However, even with its stellar performance, the S&P 500 would have to rise another 34% to match its previous all-time high set in October 2007.

As the following table indicates, while recent results have been outstanding, annualized total returns for the 3, 5, and 10-year periods remain significantly below most investors’ long-term expectations for stocks, which are in the 9% to 10% range.

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The strong recovery of the stock market has surprised many, especially considering that numerous economic statistics continue to

The year ended on a strong note, with the S&P 500 Index advancing 6.0% in the fourth quarter. Since the current rally began in March, the S&P 500 has recovered about half of its total bear market loss. The S&P 500, which peaked in at 1565 in October 2007 and bottomed at 677 in March 2009, closed the year at 1115. While the 26.5% returns in 2009 are encouraging, the S&P 500 currently stands 28.8% below its all-time high. As noted in the table below, the S&P 500 has produced an average annual loss of 1.0% for the past 10 years – making it the worst calendar decade on record for the index.

After much debate, negotiation, and deal making, the Senate health care reform bill appears to be on track to be passed this week. Following President Obama’s election in November 2008, the consensus investment opinion was that health care insurers would suffer under any likely health care reform scenario.

In looking at stock price performance since the day after the November 2008 presidential election through yesterday’s closing prices, the health insurers have delivered phenomenal performance, especially compared to the S&P 500 Index.

Here are the numbers:

The market’s strong rally, which began in early March, continued through this year’s third quarter. The S&P 500 Index produced returns of 15.6% for the quarter, as more signs emerged that an economic recovery had begun. From its low on March 9, 2009, the S&P 500 has risen 56%. Even with this strong performance, the S&P 500 stands 7% below its year-ago level and 32% below its all-time high of October 9, 2007.

While the quarter and year-to-date numbers have been very strong, the following table illustrates that the major stock market indices continue to show 3, 5, and 10-year results that are significantly below the long-term annual average of almost 10%.

The first quarter of 2009 ended with a glimmer of hope that the worst is over for stock market investors, as the S&P 500 Index rallied 17.9% from its bear market low set on March 9, 2009. For the month of March, the S&P 500 gained 8.8%, making it the third best March on record. However, it was not enough to save the quarter, as the S&P 500 lost 11.0% for the first three months of 2009. Most of the first quarter records for the S&P 500 Index were set for negative performance:

• January’s loss of 8.4% was the worst January ever.
• February’s loss of 10.7% was the second worst February ever.
• The first two months’ cumulative loss of 18.2% was the worst ever.
• The first quarter loss of 11.0% was the worst since 1939.
• The first quarter produced the sixth consecutive quarterly loss, resulting in a cumulative loss of

Stocks continued their downward slide through the end of February and into March, reaching a new low for this bear market. In February, the S&P 500 Index declined 10.7% - the worst February since 1933. Stocks have fallen 43% in the last six months – the worst six month stretch since 1932. The S&P 500 Index is now at the same level that it was in October 1996.

The Great Recession

As can be noted from the previous statistics, most of the comparisons for recent stock market performance are from the Great Depression. This might lead many investors to believe that the current economic state is also similar to the Great Depression. However, while the economy is weak and further deterioration is likely, it is worthwhile to note that current economic conditions bear little resemblance to the Great Depression.

Gross domestic product (GDP) is considered to be the broadest measure

The stock market’s recent slide to new lows has a lot to do with the lack of confidence in the recent actions initiated by the Obama administration. The stimulus bill, bank plan and mortgage relief plan have been met with skepticism and in some cases disdain

While some of the money used in these plans falls into the category of investment and will eventually be paid back, a considerable amount has no payback potential. In this second category are the tax cuts, extended unemployment benefits, payments to states to fund current operations, and payments under the mortgage relief plan. These expenditures will result in a permanent increase in the national debt, which is now over $10 trillion, with no direct means for repayment.

While estimates vary considerably, there is a high likelihood that the fiscal spending needed to pull the U.S. out of this recession could permanently add $1 trillion