February market update: Unloved int'l stocks soar

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.