Up, up, and away. You’d almost forget the economy is, at best, flat, and, at worst, is taking a pause before another plunge. (We’re in the “flat” camp incidentally.) The S&P 500 was up just shy of 10% in April, a 9.56% gain that beat the Dow’s 7.56% for the month. Small-cap stocks led the rise with a 15.46% monthly gain, while the tech-heavy Nasdaq was up a bold 12.46%. Longer-term government bonds continued to collapse off their bubble-like boom and delivered a negative 4.83% return for the month. Of course, if we get an even deeper recession the government-bond boom will likely return.

If the last six weeks in the market are any indication, the panic in the financial markets could be behind us. While getting another 25% or more out of stocks may require the economy and housing market to stop sliding, investors seem comfortable that we’ve stepped away from the precipice for now, and that apparently the drop below Dow 7,000 was panic-based. This move could be a dead cat bounce, or a suckers rally, or some other term used on Wall Street by people who incorrectly called the markets direction.

The stock death spiral continues with double-digit declines in most major indexes in February. The Dow was down 10.66%, the S&P 500 lost 10.65% (for the worst February return since 1933), and the small cap Russell 2000 fell 12.15%. Foreign stocks dropped by about the same magnitude (or rather craptitute…) The tech heavy (and bank-lite) Nasdaq was down a mere 6.68%. Bonds were near flat with the aggregate bond index down 0.38%. Not helping matters was the U.S. Government, which of late appears to be reducing confidence and adding confusion and uncertainty. Investors are starting to realize the current problem doesn’t fix easy.

As of Monday, March 2nd the S&P 500 is already down about 22%, including dividends, in 2009 – more than half of 2008’s loss of 37%. The market is now down over 50% from the peak in late 2007. We used this downward spiral to make some more changes to the portfolio, detailed in our portfolio commentaries a few days ago. The goal of this trade was to sell our successful inverse commodities ETF (after an over 300% return), cut back on some recently added closed-end funds that are no longer a bargain, and to increase our overall stock allocation slightly.