The wheel of life has changed and the New Year has begun ushering a new sense of hope and positivity from the markets. 2011 was a year where events on both sides of the Atlantic affected commodity market movements. Initially, the devastations caused by the earthquake in Japan followed by the political chaos in the MENA region briefly took away the spotlight from USA and Europe. However, in the latter half of the year, the spotlight again shifted towards the degrading debt situations in Europe and fluctuating fortunes in the improvement of the US economy. Fast forward to the current reality and the markets are still being affected by the events on both sides of the Atlantic. The irony has not changed!

Markets have started the New Year with a fresh wave of positive reports on the US economy and that could temporarily help turn the focus away from the chaotic Euro region. The US stock markets hobbled out of 2011 on a down note. The DOW ended the year with a 5.5% gain at 12,217, but the S&P 500 and NASDAQ registered their first annual declines since 2008. The challenges of the year ahead will emerge almost immediately as investors watch Europe’s sovereign debt auctions and a meeting between the leaders of France and Germany on 9^th January. Europe’s inability to contain its debt crisis spilled into financial markets in a big way in 2011, and coupled with a slowing growth, pressured world stock markets, many of which suffered losses of immense proportions.

The US data in the week will be a test for markets because generally improving US data has normally been the silver lining amongst the dark clouds. However, economists have opined that the general economy is widely expected to slow from the pace of 3% plus growth forecast for the fourth quarter. Europe’s impact alone could take a staggering 1% point off US growth in 2012. The big focus of the year could be the nonfarm payrolls report, expected to show 150,000 jobs were created in December of the year gone by.

The’ January effect’, whereby new funds enter the markets, could send the stock markets on a positive ride initially. The key as the equity strategist put it is the performance of the stock markets in the first five days of the year. Researchers conclude-since 1945, whenever the markets have been up in January, it has been up for the entire year 88% of the time. 

Let’s hope with renewed vigor that when 2013 knocks at our doors, investors will have a smile on their face and joy in their hearts. For that to happen we wish our invaluable patrons-Bon Voyage 2012!