February market update: Unloved int'l stocks soar

Market Analyze

U.S. stocks turned in another good month in February, with the broadest U.S. index, the Wilshire 5000, returning 4.28 percent, including all dividends. For the year, U.S. stocks are now up 9.53 percent, and only about .84 percent from their all-time high on October 9, 2007.

In September of last year, stocks declined for the fifth straight month, and pessimism reminiscent of the financial collapse made a resurgence. Since the Oct. 3, 2010 bottom, U.S. stocks returned 26.70 percent. This adds another data point to the theory that stocks perform better during periods of pessimism.

According to Wilshire Associates:

-- February was the third consecutive month of U.S. stock gains.
-- U.S. stocks gained in four of the last five months. November had only a 0.5 percent loss.
-- This is the best start for U.S. stocks since 1991.

The 9.53 percent year-to-date return for U.S. stocks was bested by international stocks, which returned 12.32 percent. That's using the Vanguard Total International Stock Index Fund (VTIAX), the broadest of all international funds. REITs (VNQ) lagged U.S. stocks, returning only 5.16 percent. The Barclays Aggregate Bond Index gained 0.78 percent.

The strong equity performance has resulted in investors returning to stocks. The Investment Company Institute yesterday reported positive flows into equity mutual funds for the third week in a row, providing more evidence that investors chase performance.

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    Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.