Attention investors: If you liked 2011, you may love 2012.
The stock market’s spectacular first months of this year have given way to a second-quarter swoon that returned investors to something like break-even so far. Unlike 2011, this market didn’t even wait for the summer solstice before giving back all its early gains.
In fact, we appear to be living through the third annual installment of a mini boom and bust cycle in US stocks. The 2010 experience ran up stock prices until late April and then hit bottom by July — a brief but hard fall that chopped 16 percent off the value of stocks.
While the market enjoyed a late recovery to finish 2010 up by 12.8 percent, in 2011 it rose, fell, and recovered to literally break even by the end of the year.
For the past three years, stock and bond markets have moved up and down with alternatively hopeful and grim outlooks for economies around the world. What’s particularly disappointing about 2012 is that it really felt different in the early months this year. I counted myself among the optimists who hoped the latest economic recovery was broader and stronger. It felt sustainable, something to build upon.
That may still turn out to be the case, but the global economy is struggling to move past the same old debt problems. Europe keeps spinning its wheels, emerging markets are stalling, and America alone can’t pull the world’s economy back over the top.
The scripts from the previous two years ended with dips but no economic slide back into recession. There’s no reason to believe there is anything worse in store this time.
But who can really blame investors for reacting cautiously when faced with a possible third stall? They have moved away from investment risk of all kinds and into safer alternatives.
Start with bonds: The rush toward government securities last week, triggered by a poor jobs report, drove interest rates on 10-year US Treasury notes to 1.47 percent. A stampede of buyers drove bond prices up and yields down. Those yields rose modestly on Monday.
The panic of melting financial markets in 2008 pushed 10-year Treasury yields down to a low of 2.12 percent — a jaw-dropping number at the time. When markets slumped last summer, the 10-year Treasury yield fell to 1.72 percent — even though the financial danger at that moment didn’t compare to the crisis three years earlier. Now yields are lower still amid economic news worthy of concern, but not panic.
There are several reasons why Treasury rates have fallen so steeply, including four years of government influence over markets and the logical flow of money out of European banks in favor of safe harbors.
The biggest factor? The Federal Reserve’s demonstrated commitment to keep interest rates ultra-low and its explicit plans to keep them there, says Paul Edelstein, a US economist at IHS Global Insight, a forecasting firm in Lexington.
If the US Treasury market is priced for the end of the world, the stock market trades at values that anticipate stormy weather. Equities have fallen hard over the past two months (the SP 500 has slumped 10 percent since its April 2 peak), but the market’s leading benchmarks are still close to break-even.
Locally, stock price trends have been headed in directions you would expect when the world is worried about stalling economies. Among 200 public companies in Massachusetts, 61 have seen their stock values fall by at least 20 percent since April 2. That group is heavily stocked with technology companies with stocks that are bought in optimistic times and sold quickly when the mood turns gloomier.
A few examples: iRobot Corp. of Bedford, Nuance Communications Inc. of Burlington, and IPG Photonics Corp. of Oxford have seen their shares sink between 26 percent and 28 percent since April 2.
Stocks at today’s values would be considered a bargain in more upbeat economic times. Indexes tracking big US stocks are valued at only about 12 times earnings forecast for 2012, cheap by historical standards.
Companies — especially American businesses — managed to increase profits through the recession and the slow, bumpy recovery. But investors are reluctant to bet on those earnings forecast in a soft global economy.
This year certainly feels like a replay of 2011. That would mean more volatility ahead and not a lot of profit along the way.
Try BostonGlobe.com today and get two weeks FREE.Steven Syre is a Globe columnist. He can be reached at syre@globe.com.
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