2011 brought something for everyone; the bulls, the bears, and the indifferent. On the bullish side, the Dow Jones Industrial Average ended up gaining 5.5% for the year. On the bearish side, the Nasdaq Composite lost 1.8% for 2011. The S&P 500 came full circle and finished 2011 at the same place it began the year.

While stock prices ended the year near where they began it, and in between there were dramatic falls and rises. Most of these swings could be attributed to the oscillation between fear and optimism related to the European sovereign debt crisis. Investors flocked to vehicles with perceived safety, such as U.S. Treasury bonds, precious metals, and to a lesser extent dividend-paying stocks. There was such a stampede to safety that bond yields, which move inversely to bond prices, are the lowest they’ve been since the Carter administration. The yield on the benchmark 10-year U.S. Treasury bond is less than 2%, which is below even that of the S&P 500.

The events in Europe made the greatest impact on investors in 2011, although Arab uprisings and political stalemates in the U.S. made their presence felt, too. Promising gains early in the year were erased in August after a near government shutdown and soon investors were facing double digit losses. Slowly buyers returned after an uptick in the domestic economy and optimism over Europe grew. These things helped bring stock prices back to where they began the year.

The events from above overshadowed what was a pretty good year for corporate profits, which are expected to have risen by double digits once fourth quarter results are reported. Instead a contraction in valuations during 2011 offset the rise in earnings. The good news is that entering 2012 valuations are at their lowest levels in over 20 years. And the outlook for the economy and corporate profits are optimistic enough to support the potential for solid stock market gains.

The backdrop is exactly the unknown investors are facing in 2012. There are still serious short-term questions facing Europe. Thus far solutions have only addressed long-term problems and merely postponed the most painful steps needed to address the short-term. This means there is a high likelihood there will be more periods of uncertainty associated with Europe in the months ahead. The potential for turmoil was on full display today when Greece’s government warned that if Europe fails to finalize the details of a second bailout the country would be compelled to leave the euro.

There will also be political uncertainty to some degree, as the election season kicks into full gear. Iowa starts the process tonight with its Republican caucus. Two months from now—March 6 to be exact—there is a high probability we will know who will be facing President Obama in the November elections. The result is most of 2012 will be one giant campaign with politicians arguing what direction the country should take in 2013 and beyond. The makeup of our future government and the policies they are most likely to employ could have an impact on investors’ actions.

Throw in continued political turmoil in the Middle East and uncertainty regarding the Korean Peninsula and there is plenty of potential for headline-stealing, turmoil-creating headlines. Otherwise there is a lot to be optimistic about in 2012 if you are an equity investor. Earnings are set to expand at a double-digit rate and the economy and job market appears to be gaining momentum. Meanwhile, valuations are low enough to limit downside potential associated with headline risk. If the world successfully navigates the pitfalls noted above, then investors are likely enjoy a very good year.

This week we get are our first batch of December data, which will give us an indication on how good of footing we are on entering the year. The reports will be highlighted by Friday’s employment data, which is expected to show nearly 200,000 in private sector jobs created during the month. This will be the last news on the economy before the unofficial earnings season begins next Monday. Today’s opening indicates investors are ready to take the plunge into stocks and we believe long-term investors can join them.