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The S&P 500 and DJIA stalled in March, with a rebound in the last week of the month providing the modest 1%-2% gains. Among The Leuthold Group’s 62 equity sectors, 40 (65%) beat the S&P in March. Yes, it was another good month for active managers.

The Leuthold Group’s Intrinsic Value Benchmarks provides another way of estimating upside potential for the DJIA and S&P 500. Based on the past history of bull market valuation levels, where might the stock market be 12 months from now?

In the report released on March 27, we witnessed the single largest number of block sales over the history of our work which dates back to 1982.

A performance rundown for our equity market sectors (and other measures) ranked by March 1991 performance - 62% of our sectors beat the S&P 500.

This has been a vintage “bounce” period, perhaps the best ever! We know that some of our smarter clients did play this game. The following section is a monitor for those fortunate and gutsy few.

Recognizing the obvious client interest in the market views of other professionals, we are initiating “Polling the Pros”. Whenever we have a significant number of investment professionals gathered together, we will ask their stock market opinion via a ballot. So now when you ask us what Leuthold clients think of the market we will no longer have to wing it.

The worst may be over for New England real estate and the prospects of another major banking crisis smashing the bank stocks have greatly diminished. Thus, in this issue, we are no longer waiting for the “other shoe to drop” and are selectively adding to our bank stock holdings.

This month, the Conventional Asset Allocation Model has added to its holdings of German government bunds, taking them up to 18% of the model’s assets. Normally this would be a subject for this publication’s “Foreign Investments” section. However, the considerations involved in making this investment decision should be of broader client interest.

In March, the fixed income markets were a mixed bag. Short term rates fell 25 basis points and 90 day bills ended the month well below 6% (5.74%). Junk bonds extended their sharp February rally. Outside of short term rates and junk bonds, the fixed income markets recorded little net change in March.

The Leuthold Group Major Trend Index has improved 543 points from a month ago, with four of the five broad categories of analytical tools firmly in the bullish camp.

A performance rundown for our equity market sectors (and other measures) ranked by February 1991 performance (75% of our sectors again beat the S&P 500 in February).

This has been a vintage “bounce” period! We know that some of our smarter clients did decide to play the game. This section is a monitor for them.

Some prognosticators have pretty fair records in predicting the direction of the market, but it is very difficult to pinpoint the strength of major advances and declines. Rather than just pull a number out of a hat, the best approach to quantifying how far this market can go is to look at The Leuthold Group’s Benchmarks.

Jim Floyd has cranked up another interesting index for us to center attention on “where the action is” in the secondary arena. The study provides a good picture of the wide part of the ultimate narrow door - a group of secondary issues dominating current trading activity.

I spent two weeks during February in Chile, most of the time on a white water rafting adventure down the Bio Bio (Bee-0 Bee-0) river. Then, thanks to friends at N.M. Rothschild in London and their associates at Banco Bice in Santiago, I also spent part of my time learning more about the investment scene in Chile.

The bond market continued to advance in early February. It peaked however on February 8th, the day after the Treasury completed its financing. In the week following, T-bonds held in a narrow range, but began losing ground in the last half of the month. In the final days of February and on the first trading day of March, the decline picked up momentum.

We now expect stocks to move considerably higher. Based on our Intrinsic Value studies, the S&P 500 has room to move into the 400-420 zone, the DJIA to 3300-3600. These levels represent gains from current levels of 20%-30%. Secondary stocks are expected to do even better than this.

I know at least some readers are even now wanting to ask questions, similar to the following. So let me get the jump on you.

This may be a tactical war play, but it could be more. Some of these stocks may once again be recognized as growth stocks, even if we see a speedy resolution of the Mideast conflict.

A performance rundown for our equity market sectors (and other measures) ranked by January 1991 performance (80% of our sectors beat the S&P 500 in January).