Is the Market Getting Its Mojo Back?

Chuck LeBeau is director of analytics at SmartStops.net

Much like the movie character Austin Powers, the stock market lost its mojo in 2008 when systemic market risk erased trillions of dollars of capital and gave investors no place to hide.

There was no protection against a whirlpool bear market that was dragging everything down at the same time. Diversification and rebalancing tactics proved to be about as effective as rearranging the deck chairs on the Titanic. Investors no longer focused on profit opportunities, but instead were scrambling for ways to control losses and preserve what little capital they had left.

Shrinking 401(k) plans became "201(k)" plans, and many investors indefinitely postponed their plans to retire. Depleted college funds will leave June graduates shopping for financial aid. For months, the stock market has been likened to a graveyard -- no one can get out and no one wants in. It's evident that buy and hold investing died last year and was buried in that graveyard. Even Warren Buffett struggled.

Over the last few weeks the market has come back to life, and investors are wondering if perhaps the mojo is back. Google(GOOG Quote) has gone from $250 to over $365. Since March, Apple(AAPL Quote) has climbed from less than $83 to more than $116.

Even more noteworthy perhaps, many lesser-known stocks have made spectacular recoveries. Since February, household products company Blythe (BTH Quote) has skyrocketed from $13.64 to a recent close at $35.27, a rise of more than 250% in only 10 weeks. Oriental Financial Group(OFG Quote) has leaped from 91 cents in March to a recent close at $5.58. It would be fair to say that going up 600% in six weeks takes some serious mojo. Even usually stodgy bank stocks are starting to impress. Bank of America (BAC Quote) went up 35% in one day last week.