Many cheery returns

Value funds, meanwhile, tended to be more heavily invested in natural resources, utilities, and financial services, all of which turned in good to excellent performances. Natural resources - led by oil-company stocks - performed especially well as oil prices topped $50 a barrel in the summer before settling in at a still-profitable $43 a barrel, a $10 increase for the year.

As for 2005, depending on who's talking, the S&P 500 will gain 10 to 15 percent - or it will end up about where it started.

Mr. Clark, for one, thinks the stock market could fall 10 to 15 percent in the middle of the year, before finishing slightly positive. "I see a decent but volatile year," he says. "It will scare the little guy from putting money in or scare him into taking money out. One or the other."

The market will make modest progress, agrees Brian Rogers, chief investment officer at T. Rowe Price in Baltimore. Corporate earnings have been reasonably strong in the past few months, Mr. Rogers notes, and he expects that pattern to continue this year. He also points out that companies are still reluctant to increase capital spending, which has resulted in improved balance sheets, and that dividend activity has been positive, with more than 200 companies raising dividends in 2003. He estimates the S&P 500 will return from 5 to 9 percent.

This may also be the year that large-cap stocks finally begin to outperform their small-cap counterparts after several years of lagging them, Rogers says. For one thing, smaller and mid-size companies will find it harder to squeeze more profits out of their operations, a situation that will make high-quality companies with long histories of steadily increasing profits more attractive.

While analysts are somewhat optimistic about this year, they also see reasons for caution.

"I tend to look at the deficit within the US," Vostry says. "I see that as potentially problematic. The hope is that interest rates won't have to rise substantially as a result." Even though the Federal Reserve Board has raised short-term interest rates five times in the past seven months, intermediate- and longer-term rates have stayed relatively low. That's because investors felt the Fed was controlling inflation.

But heavy borrowing by the Treasury Department to finance the deficit could push up longer-term rates, creating a difficult climate for both stocks and bonds, Vostry explains.

Given this outlook, the advice may seem trite, but it also could be particularly useful in 2005: Stay diversified and don't look for a repeat of short-term trends.

"I think bonds have as much risk as stocks right now, with interest rates going up," Clark warns. For his clients' portfolios, he is emphasizing funds whose holdings are somewhat more defensive, with an emphasis on consumer goods and energy.

"People are going to keep spending," he says. And "energy is going to stay strong, I believe. I don't think oil prices will go down nearly enough to cause energy companies problems with their earnings."

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