Markets Resume Their March Upward

03/10/2010 12:00 pm EST

Focus: MARKETS

Janet Brown

Editor, NoLoad Fund*X

Janet Brown, editor of NoLoad Fund*X, says the markets bounced back in February, and she tells which sectors and asset classes did best.

Stocks resumed their upward march after a mid-January through early February correction. The Dow Jones Industrial Average and the Standard & Poor’s 500 ended the month up [around] 3%. The small-cap Russell 2000 gained 4.5% and the technology-dominated Nasdaq Composite index [rose] 4.6%.

Gains were strong in February, but not quite strong enough to recover all January’s losses, and most US indices are slightly negative for the year. International markets were weaker than domestic, and the Dow Jones Global index, excluding the US, lost 0.1% in February and is down 4.8% [so far this year].

The average US stock fund was up 3.7% last month. Mid-cap funds were strongest, followed by small caps then large-cap funds. Real estate was the top performing sector, delivering 5.6%. International funds continue drifting down the ranks, although several remain as Holds.

[Some] emerging market funds were flat with pockets of strength in Latin America and China. Keep in mind that China started correcting last November, losing more than 20% peak to trough.

Yet the last 12 months marks a window of exceptional global gains. The widespread rally that brought markets back from the brink in 2009 was one of the biggest ever. One year ago, investors wondered where the bottom might be. Major indices closed at their lowest levels in 12 years. Many investors became overly conservative, while others reassessed their risk tolerance and may stay away from stocks for years.

The problem is that at every milestone, the future is no more knowable than it was at the previous one. But it was a good bet that stocks would rally strongly off the bottom.

Then, as now, we advised subscribers to look at today forward in order to determine an appropriate allocation to fund long-term goals. We reiterate our belief in the power of businesses, and their shares, to outperform all other investment classes over the long term. Even after the terrible 2008 declines and the “lost decade” ending December 31, 2009, we fully expect stocks to outpace all other investment categories over the long term.

At the same time, we believe most investors are best suited to a balanced portfolio that includes fixed income to buffer the volatility inherent in stock investing. Successful investing is about making decisions based on long-term goals. Investors who follow a disciplined investment strategy endure the volatility of the market’s ups and downs but are positioned to achieve their long-term goals.

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