Stocks: Good year, bad decade

NEW YORK (CNNMoney.com) -- Since cratering at 12-year lows in March, the S&P 500 has staged a powerful rebound as investors turned what could have been an abysmal 2009 into the second best year of the decade for stock returns.

Between war, recession, corporate malfeasance, and the collapse of the housing market, investors have had a tumultuous 10 years. The S&P 500 plunged 23%, seeing its first losing decade in close to a century.

But the decade could have been even worse, if not for the turnaround in 2009.

In the just-completed year, the S&P 500 gained 23.4%, the Dow industrials gained 18.8% and the Nasdaq added 44%. That's trumped only by 2003, when the S&P 500 gained 26.4%, the Dow added 25.3% and the Nasdaq climbed 50%.

Like 2009, 2003 marked a big turnaround for the stock market as the economy emerged from a recession brought on by the 9/11 attacks and the collapse of the tech bubble.

For 2009, the big recovery has come in the aftermath of the housing market collapse and credit crisis and the worst recession since the Great Depression.

Although 2009 gains are strong historically, gains are even more substantial since stocks bottomed in March at the height of the financial market crisis. Since closing at a 12-year low on March 9, the Dow has gained 59% and the S&P 500 has gained 65%. Since closing at a 6-year low on the same date, the Nasdaq has risen 79%.

All 10 S&P 500 economic sectors managed gains this year, with technology the leader, rising 62% versus a year ago. Materials took second place, rising 47.1% from a year ago. The biggest losers were telecom, up just 3.6% and utilities, up just 8.4%.

Gains this year were driven by several factors, notably the government injection of trillions in fiscal and monetary stimulus into the economy.

A weak dollar also played a big role, boosting commodity prices and shares as well as the stocks of big blue chips that do a lot of business overseas who benefit when the U.S. currency is weaker.

Investor psychology also contributed, as investors went from factoring in another Depression to a recession to an eventual recovery.

But the year ahead is unlikely to see similar gains, either for the major indexes or the individual sectors, as investors look for signs that the slow-growing economy can charge ahead without unusual assistance.

"The biggest question is employment and whether the economy can start creating enough jobs to create a sustainable economic recovery," said Michael Sheldon, chief market strategist at RDM Financial Group.

He said that as this issue works its way through the market, stocks could be vulnerable, particularly if the dollar continues to firm up, as it has through most of December. The other potential catalyst for a selloff later in the year ahead could be rising interest rates, although the Ben Bernanke-led Federal Reserve is unlikely to change its policy stance until the second half of next year.

"I think that prices will drift moderately higher in the year ahead, at least until Ben Bernanke decides to land the helicopter," said Mark Travis, president and CEO at Intrepid Capital Funds. "We could end up as much as 8% higher by this time next year."

Next year also starts what is likely to be a better ten-year period for Wall Street, after a rough decade.

The awful 00s: A tumultuous 10 years brought two recessions, two major wars, one contested presidential election, terrorist attacks in the U.S. and abroad, the credit crisis, the housing market bust and the near collapse of the financial market.

In light of the events that took place, perhaps its unsurprising that the stock market experienced its worst decade in nearly a century. The S&P 500 plunged 23%, seeing its first decade of losses in 90 years. Compare that to the 1990s, when the S&P 500 gained 316%.

The Dow lost 8% this decade after gaining 418% in the 1990s and the Nasdaq, still reeling from the bursting of the tech bubble, is down 44% in the 10-year period. In the 1990s it gained 794%.

For a look at the best and worst stock performers of the decade, click here

The best-performing sector of the decade was energy, up 104%, according to Standard & Poor's. That's roughly the same gain it made in the 1990s, but in that decade, nine of the S&P's 10 sectors added at least 100%, with utilities the lone exception. Utilities gained 37%.

In this decade, only half of the ten sectors gained, with the rest sliding. Telecom and technology were the two worst performers of the decade, notable in that both were stars of the 1990s, in particular tech. Telecom lost 66% in this decade after gaining 223% in the 1990s. Technology lost 57% this decade after gaining 1,148% in the 1990s, the decade it defined.