The chairman of the firm said 2011 was a ‘difficult year to analyse’, as evidenced by the S&P closing at 1257.60, a level almost unchanged from its close in 2010, which is ‘virtually unheard of.’
O’Neill said one of the reasons he ‘mistakenly’ stuck to a bullish bias last year is because, since 1950, when the S&P trades up cumulatively over the first five trading days of the year, it has traded up for the year 86.8% of the time.
He said: ‘Well, last year was the 6th time out of 39 years when the accumulative five day move was positive, that this didn’t happen. So it was a very “odd” year in that sense.
‘The average market gain over those previous 38 years had been 13.9%, so it seemed to me that this was a rule well worth respecting.’
While the S&P ended flat for the year, most other markets were down, and it was ‘just a matter of how badly,’ said O’Neill.
‘Interestingly, it didn’t make a lot of difference whether it was the BRIC markets or Italy, many were down 20-25%.’
He said: ‘Other things I underestimated in 2011 included: the global impact of the tragic Japanese earthquake, especially on the US, the initial slow speed by which Chinese inflation would stop rising, and of course, the global obsession with all matters European Union, as well as the repeated inability of the European policymakers to get ahead of the curve.’
Conversely, O’Neill said among the small victories he would like to claim was the major reversal of the Swiss franc since the summer, which has marked the biggest single move of any major currency since floating started in the 1970s.
He also noted the strengthening recovery of the US towards the year-end.
In terms of the year ahead, O’Neill believes forecasts for the US and world are too cautious.
Nonetheless, he said lots of things could go wrong in the year ahead, including a fresh rise in crude oil prices, especially if Iran plans to cause ‘a lot of fun and games early this year.’
He said despite this, the energy supply response in recent months is probably still much stronger than many people realise.
‘I suspect that, short of a major problem in the Gulf, this is an overhyped topic – yet again.’