For stock mutual fund investors, the first quarter of this year had been looking a lot like the fourth quarter of last year: an Acapulco cliff dive.
But this time around, the equity market landed on a trampoline. Since blue-chip indexes including the Dow Jones industrials sank to 12-year lows March 9, the market has rebounded for five straight weeks.
The comeback dramatically pared stock fund investors' first-quarter losses, turning another catastrophe into a mere extremely painful pummeling. The average domestic stock fund lost 8.2% in the quarter ended March 31, according to investment research firm Morningstar Inc.
By contrast, at the market's lows last month the loss for the new year had been about on par with the fourth quarter's devastating collapse of about 22%.
The numbers have just gotten better with the start of the second quarter, as stocks have continued to rally. The average domestic stock fund's loss had been trimmed to 1.8% by the end of last week.
Is the bear market over? Your guess will be as good as that of any Wall Street veteran who never saw what was coming down the pike last year.
If you're looking for reasons to be hopeful, the best news contained in the performance data for stock mutual fund sectors in the first quarter was that investors became far more discerning about what they bought and sold -- unlike in the fourth quarter, when they sold just about everything at the same blistering pace.
Technology-stock funds mustered a 4.2% average rise last quarter. As a classic growth sector, tech's advance suggested that some investors were looking ahead to better economic times.
Latin American stock funds eked out a modest gain, reflecting surprising strength in the Brazilian market and economy, in particular. Brisk rallies in China, Russia, South Korea and some other emerging markets also helped hold the average diversified emerging-market fund to a 1.8% average loss in the quarter, offsetting crumbling markets in regions such as Eastern Europe.
At the bottom of the performance chart, the horrendous 30.2% dive in real estate funds -- even after a 40% plunge in 2008 -- showed investors' deep-seated fear that the housing market debacle would segue into a commercial real estate crash that would obliterate many real estate investment trusts.
