Small Caps & Value Lead at the Mid-Point of 2006

    by Wayne A. Thorp

    At the halfway point of 2006, investors are left to wonder: Will the markets rebound from their recent slump, or will three years of market gains be wiped out by near-record-high oil prices and the new Federal Reserve chairman’s apparent mission to “whip inflation now” that threatens to drag corporate earnings and the U.S. economy down?

    In early May, the broad market indexes were reaching levels not seen for years—the Dow Jones industrial average was at its highest level since December 1999 and the S&P 500 reached levels last seen in February 2001. However, since then the S&P 500 has lost over 5.5% and clings to a year-to-date increase of 0.3% through the close of June 9.

    Despite recent market weakness, the stock screens tracked on have fared rather well thus far for 2006: Thirty-nine of 54 have generated positive returns.

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