Mutual funds benefit from markets’ spring rally
NEW YORK - Wall Street’s spring rally allowed many mutual funds to score an achievement that eluded them throughout the credit crisis and recession: a winning quarter.
The rally that lifted the Standard & Poor’s 500 index 35.8 percent from early March and 15.2 percent since the start of the April-June quarter gave a huge boost to investments that only two quarters ago looked like one of the surest ways to lose money.
By contrast, the second quarter gave funds their best performance since before the stock market peaked in October 2007.
Large-capitalization growth funds posted an average return of 15.2 percent in the past three months compared with negative returns of 3.7 percent for the first quarter and 23.3 percent for final quarter of last year, according to Lipper Inc., which tracks fund performance.
Most fund categories are shining with double-digit returns for the second quarter but investors shouldn’t be too quick to celebrate. The stock market has struggled since mid-June to continue its climb, raising questions about whether the quarter’s gains will hold.
“The rally will get choppier and more selective over the next nine months,’’ said John Dorfman, the chairman of Thunderstorm Capital LLC in Boston.
He predicts the market will push higher because in past downturns, rebounds have lasted a year after stocks hit bottom. But he doesn’t expect the broad gains that carried so many funds in the second quarter will continue.
The idea that recovery is on the way pulled most funds higher during the quarter. Diversified US stock funds showed a return of 16.8 percent, far better than the negative return of 8.9 percent from the first quarter.
Sector equity funds had an overall return of 21.1 percent; in the first quarter the group had a negative return of 10.1 percent.
World equity funds posted a return of 26.2 percent for the period compared with a negative return of 9.7 percent in the prior quarter.
Small-cap core funds are showing a return of 20.8 percent. Funds that invest in financial services companies, which were pounded in the fall and start of the year, are putting up an average return of 26.4 percent.
Gains in commodities also pumped up portfolios. Basic materials funds have a return of 25.7 percent. Natural resources funds are averaging a return of 24.2 percent.
“With materials and commodity stocks that really just got hampered there was probably a lot more room to move,’’ said Ron Kiddoo, chief investment officer at Cozad Asset Management in Champaign, Ill.
