Let's take a good look at the equity markets. The U.S. equity markets for 2009 have been rallying for the last couple of months:
Since the March 9th low, the DOW has gained 26%. YTD, it is down 5.8%. The S&P 500 has gained 30% since March 9th. It is down just over 1% YTD. The NASDAQ, which consists of approximately 3,800 companies, is up 32% since the low and is up 6.5% YTD.
International markets have fared even better. The EAFE, which is an index of developed markets, is up 2.5% YTD and the emerging markets index is up 26% YTD. If we break the international markets down even further, we see that country specific returns have ranged from -1.5% and -1.9% in Germany and the UK to 30.5% and 45 % in Brazil and China. Clearly there has been a large divergence in both U.S. and international markets.
The big question is: will this last or is this a short-term bear market rally? History tells us that all of the equity markets will eventually return to historic averages. Is this the time to jump back in if you are out, or if you never got out should you stay in? If you stayed in, stay in! If you liquidated a portion of your portfolio you may want to consider the process of reallocating back to equities with some of your dollars.
The economy is rebuilding and, as I've shown you, so is the stock market. This may be the time to remember an old Norwegian proverb: Sell in May and go away.