Despite a relatively solid beginning to 2010, investors may be longing now for the easy months that followed the worst point of the bear market last year.Investors found it difficult to go wrong in the stock market in 2009.
Most categories of stocks rose, and growth stocks, in particular, were an easy bet as investors began to anticipate an economic recovery and bought technology, retailing and energy companies.
But now, after riding growth stocks, companies that have the fastest-growing earnings and revenue, investors have hesitated.
The strong rally ahead of the current earnings-reporting season “has investors wondering if fourth-quarter-earnings expectations have gotten too lofty, and if companies will be able to beat by enough to keep the rally going,” said David Bianco, chief U.S. equity strategist for Bank of America Merrill Lynch.
In 2009, growth stocks in the Russell 3000 index, which makes up nearly all U.S. stocks, were a clear standout, providing a 34.6 percent advance compared with 16.4 in the Russell 3000 value index. Among the large stocks in the Russell 1000, growth also outperformed.
But investors have seemed less sure of growth stocks lately as they have digested still-high unemployment figures and attempts by China’s government to slow growth somewhat.
The Russell 3000 growth stock index is up 2.8 percent this year, compared with the value index’s 3.9 percent advance.
And as they move from one type of stock to another during the recent uncertainty, market watchers are struggling to find a trend that investors can latch onto with conviction.
“The only clear trend is the lack of leadership,” the Leuthold Group said in a recent report to clients.
With the churn from one sector to another, Tuesday’s beneficiaries were health care stocks, which are growth stocks that have lagged recently.
They rose about 2 percent as a group, as investors grasped at relatively cheap stocks that they speculated could be beneficiaries if a U.S. Senate race in Massachusetts prevents Democrats from enacting a health care overhaul.
Other recent winners have been tobacco stocks, which are more insulated from frugal consumer behavior than companies that sell discretionary products. Technology stocks that were hot late last year lost some steam last week.
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