Since the previous edition of the Sterling Weekly the Dow Jones Industrial Average rose 82.42 points or approximately 0.7% to 11,637.45 I thought it would be appropriate to start the new year by taking a look back at 2010 to see the overall market and the various sector indices I track performed. I also thought it might be interesting to see what message the market might be sending us through its 2010 performance.

I track roughly 36 stock market indices. I consider 3 of these to be broad market indices, and the other 33 to be sector indices. In addition to those 36 sector indices I track 3 interest rate indices. Of the 36 stock indices I track, the average return was 17.4%. The Dow Jones Industrial Average gained 11% on the year while the S&P 500 gained approximately 10.1%, and the NASDAQ 100 gained a solid 19.2%. The index that came closest to matching the performance of the average index was the S&P Banking Index 'BIX' which gained 18.7% and was ironically the 18th ranked index. The top performing index was the Amex Airline Index 'XAL' which gained approximately 39.2% on the year The worst performing index was the Amex Pharmaceuticals Index 'DRG' which lost approximately 1.1% on the year, and was the only index I track to actually post a loss on the year.

In looking at how the ranking of these indices shook out I noticed a couple of things. The 1st being that the top performing index, the Amex Airline Index 'XAL', obviously benefited from a rebound in the economy. The same can be said for the MS Cyclical Index 'CYC' which came in 8th with a very respectable 25.65% return. The 2nd best performing index was the Amex Biotech Index 'BTK' with a 37.73% return on the year. I have always said that one of the 2 things that will cause a bull market is new technology; and the return on the 'BTK' bears that out. Unfortunately the biotech sector appears to be one of the few areas of the economy where new discoveries are being made.

The next thing I noticed was that commodity based indices accounted for 5 of the top 10 performing indices. The high tech indices were mid-range performers. The other very significant thing I noticed was that the sector indices that track the areas of the economy where government regulation had the greatest impact where the worst performing indices. I believe that if the Banking and Insurance sectors hadn't been coming off such rotten years in 2009 they too would have fallen into this category.

Finally there was the interest rate indices. They all showed a year over year decline in interest rates. Due to the Quantitative Easing programs, which are basically an attempt to manipulate the market, interest rates moved lower. It should also be noted that I consider the Quantitative Easing programs which create excess liquidity and the inflation fears they are causing to be a major factor driving the price of commodities higher; thus that is why the commodity indices were such strong performers.

Looking at what I see the market telling us, I believe that we could describe 2010 in market terms as the year of the Government in the Market.

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