The Standard & Poors/TSX composite index added 1,697.11 points in 2010, a 14.45% gain. Meanwhile, the junior S&P/TSX Venture composite index added 767 points in 2010, a whopping 50.4% rise.
The biggest contributor to these gains was the base metals sector, which rocketed up 47% in 2010 as copper gained 33%, bolstered by growing speculation and rising industrial demand from rapidly growing economies such as China.
Gold rose $325.72, or 29.7%, making 2010 the gold rallys strongest year since 2001. Currently hovering around $1400 an ounce, the yellow metal is widely expected to reach $1500 and quite possibly $1600 and beyond in 2011.
The outlook for Canadian markets in 2011 is generally positive, but another year like 2010 is by no means guaranteed. The primary risk for the resource-heavy TSX in 2011 is that the current high prices of industrial metals are dependent on the continued high demand. If the economies of China and other major consumers contract in 2011, demand will fall significantly and bring the associated materials down with it.
However, most analysts believe the crucial Chinese economy will continue to expand in 2011, which, with the U.S. economy trending toward a continued if sluggish recovery, provides a generally rosy outlook.
Among the TSXs best performers in 2010 were Western Coal Corp. (WTN:TSX) which added 279% to $12.33 a share (on the first day of 2011 trading it has gone up another 16 cents to $12.46), Nevsun Resources Ltd. (NSU:TSX) up 196% to $7.42 (now trading at $7.23) and Fronteer Gold Inc. (FRG:TSX) which gained 182% to $11.61 (now trading at $10.58).
Another big gainer was Baffinland Iron Mines Corp. (BIM:TSX), which rose 177%. Baffinland is currently the focus of rival takeover bids by Indian steel firm ArcelorMittal (MT:NYSE) and Nunavut Iron Ore Acquisition Inc., both of which are offering $1.40 per Baffinland share. Baffinland shares ended 2010 at $1.43, and are currently trading a penny up from that mark at $1.44.
In the U.S., the Dow Jones industrial average gained 11% in 2010, while the S&P 500 rose 13% and the Nasdaq added an impressive 18%. But it has not been a year without turmoil, as seen in the May 6 2010 flash crash, which saw the Dow plummet almost 1000 points in mere minutes. Economic recovery was slower than hoped in 2010, with unemployment still high and the housing market still weighed down by the after-effects of the 2008 subprime mortgage meltdown.
2011 is kicking off with good news, as the Obama administrations extension of the Bush administrations tax cuts has increased investor confidence, the unemployment rate appears to be dropping and newly released economic data shows the U.S. manufacturing sector hit a six-month high in December.
The second phase of the U.S. Federal Reserves controversial quantitative easing program (QE2) will see the Fed stimulate the U.S. economic recovery by printing $75 billion in U.S. dollars each month until June 2011. This program is adding value to the stock markets, but critics fear that the excessive burdening of the greenback with U.S. government debt could lead to runaway currency devaluation and inflation, and potentially another economic crisis if the hoped-for economic growth fails to balance out the increasing debt load. As a result, more investors, hedge funds and even major governments are seeking shelter from increasingly volatile currency markets by exchanging their U.S. dollars for gold and other Precious Metals.
Overseas markets had mixed results in 2010. In Europe, Germanys DAX gained approximately 16% and the UKs FTSE 100 added about 10%, while Frances CAC 40 dipped about 3%. Jitters about the eurozones continuing sovereign debt crisis are expected to weigh on European and world markets for at least the first half of 2011.
In Asia, South Koreas Kospi jumped 22% and Hong Kongs Hang Seng rose 7%, but Japans Nikkei dropped 3% as a firmer yen diminished exports, and the Shanghai composite slid 14% as Beijings attempts to cool Chinas faster-than-forecast economic growth and rising inflation took their toll.
Today, Globe and Mail financial columnist David Berman noted that the current bull market has been running for 665 days, in contrast to the 517-day bear market that preceded it. An average bull market lasts 915 days, so he says the current bull run may be far from over.
And while many areas of the economy are in questionable health, the 2011 prospects for metals and mining are bright.
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