The world's investors rethought the concept of risk in 2007, and the result was a vast divergence in performance among financial markets.
Suddenly, to some people Indian stocks looked safer than the U.S. housing market, long considered a pillar of security.
Speculators shied away from American junk bonds and small-company stocks but remained ravenous for commodities such as wheat, gold and cotton.
On Wall Street, as the sub-prime mortgage debacle fueled deep concerns about the long-term effects on the U.S. economy and banking system, many investors showed a new respect for blue-chip companies that appeared financially strong enough to weather whatever lay ahead.
Microsoft Corp. shares surged 19% for the year, their best calendar-year performance since 2001. Coca-Cola Co. shares jumped 27%, their best advance since 1996.
The best-known U.S. blue-chip stock indexes, however, managed only middling gains in 2007. They were weighed down by the steep losses suffered by housing- and financial-related issues.
The Dow Jones industrial average, which dipped 101.05 points, or 0.8%, to 13,264.82 on Monday, was up 801.67 points, or 6.4%, for the year.
Including dividends, the Dow's "total return" was 8.9% -- short of the double-digit gain that many Wall Street pros had expected a year ago.
The Standard & Poor's 500 index had a 3.5% price gain and was up 5.5% with dividends. That wasn't much better than what investors could have earned in a money market mutual fund.
Of course, some buy-and-hold stock investors may be glad just to have come through the year with a positive return, given what took place in the housing market and banking system.
Wall Street suffered sharp pullbacks in August and again in the fourth quarter as the housing mess worsened, losses ballooned on mortgage-backed securities, and banks and brokerages became reluctant to lend to one another.
Stocks rebounded after the Federal Reserve on Sept. 18 began to cut short-term interest rates to bolster the financial system. But the rally soon faded.
From its record high of 14,164.53 on Oct. 9 the Dow plunged to 12,743.44 on Nov. 26. That 10% decline was the index's worst slump in more than four years.
The market has rebounded again in recent weeks, but key indexes still were down sharply in the fourth quarter. The Dow lost 4.5% in the three months; the S&P 500 slid 3.8%.
