2007: What Worked, What Didn’t
As we head into the first day of stock trading tomorrow, let’s recap what worked and didn’t in 2007:
On the whole, the market had a mediocre year. The S&P 500 was up 3.3%. Not a bear market, but well under normal historical returns. People who were invested in cash (and got fed funds rate) beat the market.
Financials got killed, largely as a result of the credit crunch and housing meltdown. Home builders and those that were exposed to the real estate market got smashed. Countrywide Financial was down by 79% for the year. Washington Mutual was one of the worst performing banks, down 70% for the year. Goldman Sachs, who had a short position to the real estate market, was up by about 8% for the year.
Tech had a good year. The QQQQ was up close to 19% for the year. The Nasdaq composite, which is a broader index, was up 8% for the year. Some tech leaders included Research in Motion, up 166% and Apple, up 133%.
Small caps underperformed the market this year, especially small cap value stocks. The Russell 2000 ended the year down 2.7% and IWN, a small cap value ETF, ended down 12%.
