Investors lost trillions of dollars and U.S. stocks prices plunged to 11-year lows. Overseas markets suffered even worse declines.
Yet, to say that the 2008 market will go down in the history books might almost sound like whistling past the graveyard. As the U.S. and the global economies continue to worsen, investors are still licking their wounds and worrying about 2009.
Looking back to expectations at the start of the year, "the surprise was not that we had a bear market and a recession," said Hugh Johnson, chairman of Johnson Illington Advisors.


A year for the record books
To say that the 2008 markets will go down in the history books might almost sound like whistling past the graveyard. As the U.S. and global economy continues to worsen, investors are still licking their wounds and worrying about 2009.
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"The surprise was that events were as severe as they turned out," said the veteran adviser, who has over 40 years experience in the investment world. "I have been at this for a while and I've never experienced anything like this. It defies words to describe it."
What can be said is that many things that sounded impossible at the start of the year now have to be accepted as facts.
After its astonishing surge to nearly $150 a barrel this summer, oil now trades near $40. The market capitalization of General Motors (GM
General Motors Corporation
GM) is now lower than it was in 1927. Bear Stearns and Lehman Brothers (LEHMQ
Lehman Brothers Holdings Inc  and are no more. In October, a 900-point swing in the Dow industrials became almost commonplace.
"I'd like to use the old roller-coaster ride comparison," said Paul Nolte, director of investments at Hinsdale Associates. "But it's been more like a one-way trip down the haunted house."
Trillions lost
In a way, it didn't matter that many market strategists and commentators often struggled for the right metaphor to describe the market. The numbers flashing on TV and computer screens across the globe often spoke, and continue to speak, for themselves.
As of Dec. 12, the Standard & Poor's 500 index ($SPX
S&P 500 Index
  had lost $6.17 trillion since hitting record highs in Oct. 2007.
That reduction in global stock wealth has outstripped the losses in the last bear market - the S&P 500 lost $5.76 trillion during the entire bear market of 2000-2002. Making matters worse, this one still has room to run.
Chart of $SPX
By Thanksgiving, many individual investors discovered they would have been better off sticking their savings under their mattress rather than the stock market for the past decade.
On Nov. 20, the S&P crashed through the previous bear-market low of 776, made in October of 2002, to end its lowest close since April 1997.
The U.S. showed it hadn't lost its superpower qualities, as a home-grown housing bust spiraled into a global market collapse.
The S&P Broad-Market index, which blends more than 11,0000 stocks from developed and emerging markets, has lost $17.7 trillion year to date. Most of the losses, or $16.1 trillion, were logged between May and December.
"Until May, global markets were still expected to grow faster than the U.S., as China was seen growing more than 10%," said Howard Silverblatt, index analyst at S&P.
That optimism evaporated as the credit crisis spread around the globe and the U.S. recession clipped the outlook for global growth.
In November, the World Bank said China's economy is likely to expand at a 7.5% rate in 2009, its slowest pace since 1990.
Once leaders in emerging markets, stocks in Russia have now plunged 72%, those in Turkey are off 68%, and those in India have fallen 67%.
In October, Japan's Nikkei 225 hit a 26-year closing low; Iceland's exchange tumbled 81%, while Brazil's Bovespa index slumped 25%, its biggest one-month percentage loss in 10 years.
Dow swings
At times earlier in the year, it looked like investors were going to get a break. After the near-collapse and subsequent bailout of 58-year old investment firm Bear Stearns in March, markets found some degree of stability and even gained back some ground until May.
Chart of $INDU
But as more Wall Street institutions crumbled, all beset by investments linked to bad home loans, fresh selling bruised stocks. After Lehman Brothers went bankrupt late in September, one of a string of large financial failures and government bail-outs that month, stock markets set multidecade records for lows reached and big swings registered.
In October, the S&P 500 had its most volatile month since 1929, right after the stock market crash that preceded the onset of the Great Depression.
The Dow plunged to its worst point drop on record, down 777 points, on Sept.29. By Oct. 15, the index had registered 508- to 733-point drops in three separate session.
The index also proceeded to surge to its biggest point gain on record, up 936 points, on Oct. 13.
According to S&P, over the past 60 trading sessions alone, there were 17 days where stocks moved up or down by at least 5%. To put this in perspective, there had only been 17 days of 5% or more swings over an entire 53-year period, between 1955 and 2008.
Between Oct. 27 and Nov. 4, the day of U.S. Presidential election, stocks on the S&P surged more than 18%. But between Nov.4 and Nov. 20, they proceeded to slide 25%, before gaining more than 16% through Dec. 11.
"Playing those swings correctly, an investor could have made a 72% return," said S&P's Silverblatt.
Safe havens or 'money for nothing'
But most investors are unlikely to have tried playing the swings. Safety and preservation of capital became the name of the game for many.
The need to protect one's savings became so pressing that on Dec. 9, the government sold 4-week Treasury bills at a yield of 0%, meaning that bond investors were happy to just have the principal they'd lent back to them without a loss.
The yields on other government bonds, considered the safest among all investment classes, also reached lows unseen since the government began keeping records in the 1950s.
While investors opened their wallets to the U.S. government, they lent very little to anyone else. Commercial paper markets froze after the Lehman collapse, threatening to put out of business anything from big banks to small firms dependent on short-term loans. Borrowing costs for companies surged.
Even banks became increasingly unwilling to lend to each other, as more took huge write-downs from bad assets. The London interbank offered rate, or Libor, soared to record highs near 7% after Congress first rejected a $700 billion bailout for financial firms.
Oil's wild ride
Until July, the one sure bet for the nervous investor had been commodities.
Hopes for global growth, along with a combination of natural disasters, geopolitical tensions, a sliding dollar and market speculation, had led energy and food prices to rocket, causing severe food shortages in poorer countries.
It was a shock when oil surpassed $100 a barrel in January. But those prices looked cheap as the futures contracts skyrocketed to $147 a barrel by July.
That level turned out to be commodity's swan song. It has plunged to trade around $40 a barrel in December, a swift descent echoed by other commodities.
"The rise in oil to $147 per barrel and its subsequent decline to $40 was vicious volatility," said Hugh Johnson. "It defies words to describe it. It certainly made life tough for the year."
Goldman Sachs analysts, who were laughed at back in 2005 when they first suggested oil might reach $100 in a "super spike," now predict oil could fall back to $30 a barrel in the coming months.
Gold also hit a record high above $1,000 an ounce in March, before slumping back below $700. The precious metal, however, has managed to crawl back to trade above $800 an ounce as investors seek safe-haven assets.
Besides oil, food stuffs such as corn also first reached record highs above $6.5 a bushel in June, before sliding back under $4 a bushel amid fears of a global recession.
A surge in the dollar helped precipitate the collapse of commodities. The dollar halted its four-year slide around May and proceeded to rally against most of its counterparts as financial and economic concerns spread globally, turning the U.S. currency into a safe-haven play, along with the Japanese yen.
The U.S. currency jumped 13% against a basket of six major counterparts over the course of the year so far.
Dramatic and record-setting swings in nearly every sector of security have sent professional investors thumbing through the record books.
Chart of GM
"Nothing compares with the crisis that we have faced," Johnson said Johnson of Johnson Illington Advisors. The U.S. stock rout already registers as the fourth-worst bear market since 1898, he said. "It's clearly historic."
Here's another anecdote of how market perceptions and reactions may have changed: With the Dow swinging within an 800 point range on Oct.24, there was little immediate market reaction when Alan Greenspan, the once-venerated former chairman of the Federal Reserve, admitted to making a mistake when he testified to Congress.
While every one of his utterances used to be parsed by analysts, few now reacted when Greenspan said his view of the world might not be right after all.
"Absolutely, precisely," Greenspan said. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.

Investors lost trillions of dollars and U.S. stocks prices plunged to 11-year lows