Riding the Stock Market Wave in the First Half of 2009

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Everybody is ignorant, only on different subjects.   Will Rogers

My first quarter commentary provided a glimmer of hope, primarily because March brought a positive 9% return for the US markets, following a 9-month cumulative loss of 47%. I speculated that we might be on our way to recovery, although it would take a whopping 90% cumulative gain to recover to where we were last June.

That glimmer continued into the first two months of the second quarter, but petered out in June. So what went wrong, or was June just a “breather”? In keeping with Will Rogers’ insight, I am still seeking explanations. One thing is for certain: these are very troubling times.

2009 Monthly Returns

After I review first half stock market performance around the world, I’ll turn to the past decade, so we can set expectations accordingly. Have markets become cheap enough yet? I will conclude with a realistic and sobering look at our current debt problems - a cause for concern for both young and old.

The first half of 2009

As the next chart shows, every US style made a profit in the first half of 2009, in stark contrast to the devastation in the second half of 2008. Smaller companies fared best, as did growth stocks, led by Information Technology. I use Surz Styles and Country indexes throughout this commentary, as described at <Surz Styles>.

Style Returns

On the sector front, Information Technology delivered a terrific 25% return, which contrasts to 3% and 4% losses in Industrials and Financials respectively. Making a lot of money in these markets has been possible.

Sector Returns