Shaky Europe. Political gridlock. Volatile markets.
Familiar themes for those who lived through 2011, and investors should be ready to revisit them next year.
With a spiraling debt crisis in Europe, political upheaval around the world, and crumbling creditworthiness in major industrial nations, 2011 was a tough year to know where to invest. 2012 is unlikely to offer much respite.
The S&P 500, a measure of the biggest U.S. companies' market value, spent much of the year getting pushed up and down, flummoxing shorts and longs - and scaring Moms and Pops away from stocks. In the end, it will finish about where it started.
But the S&P 500's tepid performance was encouraging, compared with other world equity markets. The United States may still be seen as a safe haven, though even that looks uncertain.
For every rally built on improving economic figures this year, selloffs were never far away on worries the European debt crisis would eventually drag the continent into a recession and perhaps the United States as well. That could continue in 2012.
China" href="../places/china">China and other fast-growing emerging markets can no longer be leaned on as those economies slow. In 2011's last half, the poorest-performing sectors outside of banks were most connected to global growth - materials, energy and industrial companies.
"There is a growing realization that the global economy is in jeopardy," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville. "There is uncertainty in every corner of the world."
That uncertainty fed substantial volatility in 2011. Despite the S&P's flat performance this year, there were 66 trading days when stocks moved in a 2 percent range. In 2008, when Lehman Brothers collapsed during a global financial crisis, there were more than 130 trading days when stocks swung that much. But that led to a flight from equities by retail investors.
U.S. equity funds had outflows in every month since May. More than $483 billion left U.S. mutual funds in 2011 through the year's second-to-last week, even though the U.S. market outperformed foreign stocks late in the game.
BEATING GLOBAL RIVALS
The S&P 500 was up just 0.3 percent for the year on Friday afternoon. In contrast, the MSCI world stocks index .MIWD00000PUS fell 9 percent, while the FTSEurofirst-300 index finance/markets/index?symbol=gb%21FTPP">.FTEU3 slid nearly 11 percent.
Strategists say the U.S. stock market may benefit from reasonable economic growth and attractive market valuation. The S&P 500 is expected to rise 6 percent by the end of 2012, according to the most recent poll of Wall Street strategists.
Volatility is likely to persist through early 2012 because of the uncertainty in Europe and rising concern about slowed earnings growth due to recent revisions.
The S&P 500's price-to-earnings ratio - what investors are willing to pay for a dollar of earnings - is under 12, below the 25-year average of 15. In weaker markets like Germany's DAX, the figure is below 9.
"We're building in a massive recession into these numbers," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco.
U.S. companies cutting earnings' outlooks recently outpaced those raising theirs by the greatest ratio in 10 years. Some sectors, such as materials, have seen a sharp drop in forecasts for the fourth quarter, Thomson Reuters data showed.