• 73°

Six weeks of market gains attract investors

Investors who stashed money in money market funds and other “safe” investments during the height of financial market turmoil over the last 18 months are slowly moving back into the equity markets, according to a research firm that tracks more than 20,000 mutual funds worldwide.

Indeed, the commonly referenced indices have all risen impressively from their March 9 lows, which, at least to date, represents this bear market’s bottom.

The Dow Jones Industrial Average (an unmanaged index of 30 widely held stocks), which recorded a close of 6,547.05 on March 9, has been trading in the 8,000 range, a general rise of approximately 21 percent. The Dow’s recent close marked its biggest six-week gain since July 1938.

The NASDAQ (an unmanaged index of common stocks listed on the NASDAQ National Stock Market), having closed at 1,268.64 in March, is up more than 29 percent, while the S&P 500 (an unmanaged index of 500 widely held stocks) is trading in the 840 range, up nearly 25 percent from its 676.53 close on March 9.

While analysts are universally cautious about calling the recent rise anything other than tentative, and urging caution, Federal Reserve Chairman Ben Bernanke cheered investors by referring to “green shoots” in the economic picture. And the latest Reuters/University of Michigan consumer confidence survey shows U.S. consumers have more confidence in the economic outlook than at any time since Lehman Brothers collapsed in September 2008.

In fact, there was minor good news.

Mortgage applications rose 5.3 percent in the last week (over the previous week) tracked by the Mortgage Bankers Association. That’s a huge 76.9 percent increase over the mortgage application rate recorded for the same April week last year.

However, discouraging economic news hasn’t vanished, exactly.

Existing-home sales dropped 3 percent in March (compared to February), according to the National Association of Realtors, whose report noted that first-time buyers, able to take advantage of the $8,000 federal tax credit, constituted more than half of all buyers in March.

Unemployment claims continued to dampen market enthusiasm, although most economists are in agreement that employment is a lagging indicator and that the job picture may not brighten noticeably until the economy is well past turning the corner.

Optimism is growing in some investing circles simply because the end of first half of 2009 is on the horizon, and, although this current recession doesn’t have an exact historical parallel, many are looking for a gradual economic recovery beginning in the second half of this year and moving into 2010.

Strong market performance over the past several weeks isn’t an all-clear signal, but it is a reminder that investors should be mindful of market trends and watchful of sectors that may be poised to take advantage of an eventual recovery.

If you have questions about the markets or about adjusting the elements of your portfolio, please don’t hesitate to call me.