Market Analysis

Five Things That Didn't Happen in 2011

As 2011 comes to a close, here’s our look at the top things that didn’t happen.

Now that Auld Lang Syne has been sung, the champagne drunk and the ball dropped, it seems a reflective look back at 2011 is in order. Without any doubt, 2011 was an eventful year. (Then again, show us an uneventful one.) And, no doubt, plenty of significant stories are worthy of recollection. Here we take a somewhat different approach. Without further ado, here’s our list of the top financial and economic things that didn’t happen in 2011.


In late 2010, fears of a wave of 50-100 municipal defaults—totaling hundreds of billions of dollars increased—largely driven by a highly publicized segment on a popular television news magazine. And those fears stuck for a good portion of 2011. As we wrote then, this municipal debt bomb was likely a dud.

2011’s actual tally is far lower than feared. Through mid-December, only $2.1 billion of munis missed payments—lower than 2010’s $2.8 billion. Much was made over the bankruptcy filings of several municipalities—namely, Jefferson County, Alabama, which logged the biggest municipal bankruptcy by value during the year. Yet the bankruptcy relates to a 2008 default, which was largely driven by graft among political leaders.

Looking ahead, it doesn’t seem like the wave is just late. Through Q3 2011, state tax revenues increased 4.7% versus the same period in 2010, helping mitigate pressure on state budgets.[i] And many municipalities have cut expenses. Should the economy continue growing (which seems likely), budgets should generally improve, mitigating muni-meltdown risk.

The dollar’s demise

Another fear was the US dollar’s impeding demise as the primary global reserve currency, with presumed ultra-dire consequences. And some believed this meant the US’s ability to issue and service its debt would vanish, among other claims.

So what happened? Last we checked, ATMs are still issuing currency, hyperinflation currently doesn’t exist and the US dollar is still the world’s primary reserve currency. In fact, for full year 2011, the dollar finished incrementally stronger versus a trade-weighted basket of other currencies.

Should this fear resurface in 2012, noodle this: What’s going to replace the dollar? Euro? Yen? The pegged-to-the-dollar Chinese yuan? The 42% US dollar IMF SDR? If the dollar is to eventually lose its global role, the likelihood is it wouldn’t be overnight. And even in that unlikely-to-arrive-soon event, consider: Neither the pound nor euro are currently as widely used a reserve currency, yet Germany and Britain’s bond yields aren’t so very different than our own.

Double Dipping

With 2011 over, perhaps we can put the term “double-dip recession” on leave of absence. After all, should US Q4 GDP grow, which seems highly likely, it would be the 10th consecutive quarter. And GDP (both real and nominal) stands at an all-time high. As does consumer spending, retail sales and exports. And there’s little indicating the US economy changes direction soon.

A recession’s always possible ahead (though one doesn’t look likely in the here and now), but we’re long out of what could technically be called “double-dip” territory. Though we doubt folks surrender double-dip fears so easily.

Breaking up is hard to do

The eurozone certainly had a difficult 2011. And we won’t downplay the challenges some eurozone nations face in reforming to boost competitiveness. But one major fear extant all the while—a sudden, disorderly fracturing of the euro—didn’t happen in 2011. Moreover, it doesn’t appear likely in the near future (for myriad reasons; we discuss some here.)

Now, there’s nothing to say the euro exists in its present form for the long haul. It could. It could not. But a gradual, orderly restructuring occurring over a long period isn’t what most folks feared in 2011, and doesn’t necessarily carry many of the negative implications.

Big up and big down

Entering 2011, investor sentiment was highly divided between two camps—bulls expecting another above-average, big up year and bears expecting the exact opposite. Largely due to this bifurcated sentiment, our views were never so extreme. We felt this year would likely be a rocky, volatile tug-of-war, frustrating bulls and bears alike through its lack of direction.

And that did happen—both the flattish year and the frustration. Looking forward, the bullish camp was seemingly shaken out and sentiment appears far more bearish—a positive factor for 2012.

As a new year dawns, let’s not forget old times. The coming year will likely bring volatility and fears with it. Remember: Eventful is the norm. But when headlines swirl, keeping the perspective brought by past events that didn’t materialize can help steady your nerve.

In closing, thank you to all our readers. We wish you a safe and Happy New Year!

[i] Source: US Bureau of Economic Analysis, Thomson Reuters.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.