To say that 2010 was a tumultuous year for the stock market is to be both astute and forgetful. To the first point, anybody who felt the rollercoaster rush of the Flash Crash of 2010 was given a too-close-for-comfort reminder of the inherent uncertainties in the financial sector. To the latter point, there have been plenty of worse years for the stock market—if there’s nobody reading this old enough to recall 1929, surely some of you might remember 1987? Quick lesson: this time of year it’s wise to count your blessings. But also, to take heed of certain lessons. These are the top 3 things we learned from the stock market performance in 2010.
Lesson #1: Give the HFTs a Break
Immediately following the Flash Crash, all fingers pointed accusingly in the direction of HFTs as the guilty party. With proposed regulation of high frequency firms already drawing attention, the verdict was a no-brainer to many. But the later revelation that stub quotes were the main culprit served to teach us all that everybody’s favorite punching bag isn’t always the rightful target.
Lesson #2: What Happens “Over There” Matters “Over Here”
While this isn’t really news to anybody, 2010’s “Aegean Contagion” (also known as the Greek Debt Crisis) served as a potent reminder of just how interconnected and interdependent the markets of the world really are. Images of riots in the streets in Greece over the government’s plan to severely slash the budget caused a nervousness among U.S. investors that fed the flames that led to the Flash Crash in the American stock market index.
Lesson #3: There’s Life After Chapter 11
General Motors may not have risen from the ashes phoenix-style, but its return to the stock market 17 months after filing bankruptcy showed us that where there’s a bailout, there’s a way. Maybe. GM’s current stock price is up from its initial $33 per share IPO, but they’re not out of the woods yet.
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