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The 3 Biggest Trends of 2010

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Farewell, 2010.

As we ready for a new year, it's a good time to look back, reflect, and draw conclusions from the year that was. From Icelandic ash clouds to Greek and Irish bailouts, from the World Cup to the Winter Olympics, it was an eventful year.

Here are the three themes and takeaways from 2010 that most resonated with readers or inspired the most debate in our community.

Theme No. 1: The Continued Entwinement of Wall Street, K Street, and Main Street.
The S&P 500 is on pace to end the year with a more than 10% gain, bringing it back to its financial-crisis levels, but my, have times changed since Washington bailed out the big banks in 2008. The federal government's influence over and involvement in affairs of the private sector has been a source of anxiety for investors, as well as one of opportunity (more on that later). Here's a sampling of some of the big stories investors followed in 2010:

  • President Obama's health-care bill passed in March; prior to its passing, health-care stocks were sold off in droves.
  • Companies in the for-profit education industry watched their stocks slide over concerns that the industry would get stricter federal regulations.
  • Federal Reserve Chairman Bernanke has undertaken a policy of stimulating the still-sluggish economy (via "quantitative easing"); investors nervous about the Fed's monetary policies have flocked to gold. Gold proxies, like the SPDR Gold Trust (NYSE: GLD  ) exchange-traded fund, rose 26% in 2010.

Of the 10 articles that inspired the most reader comments, seven were related to taxation, legislation, public policy, or Fed policy.

Takeaway: We preach a bottoms-up investing strategy on -- one that is focused on the fundamentals of a business (cash flows, management, market opportunity, etc.) -- but with so many macro-level issues in play, investors cannot totally ignore those larger "top-down" trends.

Theme No. 2: Opportunism.
Warren Buffett, chairman of Berkshire Hathaway and the second-richest American, has famously written, "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."

Buffett, of course, is spot-on -- historically, the best time to buy stocks has been when everyone hates them. In 2010, it wasn't just Buffett and his professional investor brethren heeding that wisdom -- the Main Street investing community followed suit, too.

Whether it was BP's post-Gulf-catastrophe investment prospects, Greek stocks after the country was bailed out, or health-care companies in a new legislative world, readers flocked to information about beaten-down stocks and sectors.

Takeaway: Investors who can see through hysteria tend to do quite well -- just look at the returns of BP investors who got in at the point of maximum pessimism. Buffett has been sharing his "be greedy when others are fearful" advice for years, but in 2010, it seemed to catch on.

Theme No. 3: Dividends.
Of our 15 most-read articles on this year, seven were dividend-oriented, including The Best Dividend Stock. Period., the most-read Fool story of the year. Readers couldn't get enough dividend commentary -- which is strange, because dividends have typically been associated with boring, slow-growing stocks.

So what changed? All signs point to fears of the Fed's policies -- that they'll result in high inflation and a devalued dollar. Companies that not only pay but increase their dividends are a powerful hedge against inflation. It's a good sign for shareholders of a company like Lockheed Martin (NYSE: LMT  ) , which increased its dividend in 2010.

Takeaway: The broad stock market notched a double-digit gain and the recession was officially declared over, but there are lingering concerns about unemployment, the dollar, and the economy at large. In uncertain times, owning financially strong stocks that pay dividends can hedge against inflation and downward dips in the stock market -- because that dividend check will continue to come, quarter after quarter.

And there you have it: The top themes readers cared about in 2010.

If you're looking to position yourself for 2011, check out our brand-new free report, The Motley Fool's Top Stock for 2011, in which we reveal a small company set to profit -- in a big way -- from the broadband Internet expansion. Get instant access by clicking here -- it's free.

Here's to a prosperous 2011!

Brian Richards is the managing editor of Brian does not own shares of any companies mentioned. The Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (46)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 18, 2010, at 6:20 PM, mtracy9 wrote:

    The article says, "Buffett has been sharing his "be greedy when others are fearful" advice for years, but in 2010, it seemed to catch on."

    For the really aware investors, it caught on earlier in 2009, when pessimism was the the deepest and when the S&P nevertheless returned 26.5% for the year.

  • Report this Comment On December 24, 2010, at 8:00 PM, busterbuddy wrote:

    Dividends are and have always been important. We've all learned again that it is the accumulation of capital that is key foundation of sound investing. Seeing cash from a company and having the choice to reinvest it or keep it is sound. Watching a stock run up and not knowing when to sell it or not. Having to create options and spreads, hoping you can earn money from the moving priced stock , seems stupid waste of time given you can get cash via a dividend. And for those who always point to Berkshire, notice that Buffett loaned money to Goldman and JP Morgan but asked for Preferred stocks paying 10% yields. He didn't ask for bonds or stock he as for Preferred stock paying dividends. Bird in the hand is worth two in the bush.

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10/24/2016 4:00 PM
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