Stocks May Struggle to Match Banner 2009 in New Year

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The stock market may be putting a bow on a successful 2009, but prospects for a repeat performance in the new year may be dim.

The Dow Jones Industrial Average shrugged off the nation's worst financial crisis since the Great Depression to add roughly 20 percent for the year (depending on how the final trading day of 2009 goes). That includes a better than 60 percent gain from its low point in March. In all, it would be the best yearly gain for the stock market since 2003.

But, as the Wall Street Journal reports ($) Thursday, those gains are unlikely to be matched in 2010 as investor's take stock of the economy's true strength and, in turn, the market's true value.

The U.S. market is "a little bit ahead of itself this year," Ed Kaniewski, a 60-year-old retired real estate lawyer, told the Journal.

While the economy is digging out of its severe recession, several key figures – such as a double-digit unemployment rate – loom over the recovery.

Kaniewski is certainly not alone in his reluctance to jump back into stocks. The Journal reports that, as of November, investors pulled $4 billion out of stock mutual funds and pumped $285 billion into safer taxable-bond mutual funds.

History shows the market's recovery may have already peaked. Following stock calamities during the Great Depression and the 1970s, the market made robust gains only to eventually squander most of them.

What can prevent history from repeating itself? The market can shore up its gains if the economy adds jobs and companies' balance sheets reflect health sales and not just cost-cutting measures, according to the Journal.