Mutual-fund investors may be feeling a little at sea about now, and very much in need of a safe harbor, if not a life raft.
A crisis of confidence in corporate governance, made worse by a wave of accounting scandals, has helped push Wall Street's main stock indexes deep into the red in their worst performance since the early '70s.
The scandals represent just one factor among several. Stir in lackluster corporate-earnings expectations, the war on terrorism, and the prospect of continuing turmoil in the Mideast, and even stoic 401(k)-holders with long-term investing horizons may feel they're in for a blow.
This has been the longest downturn since the late 1940s, with consecutive down quarters since the dawn of this decade.
Investors may also worry about finding credible navigators, after a period in which it became startlingly clear that brokers' "touts" sometimes put brokerages' interests far ahead of theirs.
And that confluence of troubling trends has had a real impact. At the second quarter's end, the bellwether Dow Jones Industrial Average had fallen by about 11 percent. Last week, to start the third quarter, the Nasdaq plunged to a five-year low.
Yet market experts point to a few havens. Many are abroad. Not that it's time to strike the colors. Bright spots can also still be found in the US economy. Among them: the robust housing and real estate markets and the healthcare and natural-resources sectors.
Consumer spending dipped slightly in May, the Commerce Department recently announced, but that was only the first time in six months. That has propped up some consumer-goods firms.
Across several industries, small, agile companies show promise. Small-cap value funds continue to perform well. Some stock experts have begun to eye the smallest of small-cap funds, micro caps, whose low-profile firms can offer great potential for growth.
What will it take to cheer the investor fleet and turn it back to buying?
For now, Wall Street resists the prevailing economic trends, say longtime market watchers such as Al Goldman, chief investment strategist for financial house A.G. Edwards & Sons, St. Louis.
"The economy is coming back," says Mr. Goldman, citing the government's recent upward revision of first-quarter gross domestic product (GDP) from 5.6 percent to 6.1 percent.
But "fear [among investors] is at an extreme," he says, referring to small and institutional investors alike.
Goldman believes the intense media drumbeat on the accounting scandals may be helping to depress the market. Perspective is important: Out of some 10,000 to 12,000 publicly traded companies in the US, so far only a handful have been implicated, Goldman notes.
And Goldman is among many experts now suggesting recovery will soon take off, barring, perhaps, a new terrorist incident equal in intensity to those of Sept. 11.
"The economy is NOT rolling over," insisted investment house Merrill Lynch & Co. in a recent economic analysis.
Merrill Lynch estimates that second-quarter GDP grew at 3.5 percent. If true, that would mean the economy grew at just over 4.5 percent for the first half of the year.
That compares quite favorably with other postrecession-year gains.
Still, investor unease helped pull down most fund categories in the second quarter. Only one major domestic category real estate was up substantially, according to Morningstar Inc., the Chicago-based fund tracker.
Pacific/Asia funds posted gains. So did Japan and South Korea funds, and even a select few funds invested in emerging markets.
Not surprisingly, most bond funds were up sharply during the quarter, although some experts believe that fixed-income funds will have a much harder time of it later this year. Gold funds lead the pack.
According to Russ Kinnel, who heads up equity analysis at Morningstar, there seemed to be an informal consensus among managers at his firm's late June investor conference that overseas funds were the place to be.
For average investors, says Goldman, that usually means "putting about 10 percent to 12 percent of one's portfolio in [funds holding] overseas companies."
Another way of riding overseas gains is to buy into funds of large US companies that do a great deal of selling abroad. Research firms such as Value Line and Morningstar help identify large-cap funds that carry export-oriented firms.
With the dollar falling in value against such overseas currencies as the yen and the euro, US firms that export abroad should become more competitive.
That is not the same as seeking to profit through currency movements.
"If you want to play shifts in currencies, then buy directly into the currency market. But don't try to do that through the use of mutual funds," since currency-market timing is very complicated, says William Rocco, who tracks foreign funds for Morningstar.
Most experts warn against making currency values too big a factor in picking foreign stocks.
Over an extended time frame, Rocco says, the rise and fall of currencies tends to be a wash. Focus instead on the quality of firms, experts say.
Buying into a global fund through a well-regarded fund company takes much of the guesswork out of the task of picking foreign companies.
(One negative for global funds, if you seek genuine diversification: They are often heavily weighted in US firms. International funds carry only foreign issues.)
Of course, on some level it's still guesswork. Further, accounting standards tend to be less regulated overseas than in the US a point that may seem ironic these days.
It's worth noting that the US market, too, is subject to scrutiny from abroad. Foreign investors own some 13 percent of all US equities, and about a third of outstanding US bonds. Their actions will weigh on the US market in the near term.
"Foreign investors are very worried about fraud in US companies, as well as the declining dollar," says Arnold Kaufman, editor of The Outlook, a financial review published by Standard & Poor's Corp.
One major danger facing the US market now is the prospect that overseas traders will play off the slumping dollar, selling off shares in US firms, says Mr. Kaufman.
Clearly, the Federal Reserve will be watching the dollar closely, to make sure that there is no sudden free fall.
Ultimately, it's the performance (and projected performance) of US firms that will chart the market's next move.
The key to the market will be what happens in "about the second week of July" next week says Larry Wachtel, a longtime market commentator with investment house Prudential Securities Inc. in New York. That's when a big wave of corporate-earnings reports starts to hit the evening newscasts.
If the reports are good, says Mr. Wachtel, the market may start to reassert itself. If the reports are lackluster, or worse than expected, then it could be a rough summer.
And though they often begin with a rally, summers, he notes, already are not consistently seasons of great, lasting gains.
At this point, many wave-tossed investors would settle for a little buoyancy to get them into the fall.