Who’s hot? Who’s not?

The first quarter of 2004 is in the books and despite a weak March the news from the stock markets is more good than bad. Let’s take a quick look at some of the winners and losers so far this year.

The Bolsa. Mexican stocks were the runaway winners in the first quarter. The Bolsa was up 19.6 per cent for the year to March 31 and shows a year-over-year gain of 78.4 per cent. In case you haven’t noticed, Latin American mutual funds have reflected this surge. The average fund in the category had a one-year return of 68.3 per cent as of Feb. 29. Unfortunately, hardly anyone profited. After years of mediocre to terrible results, the surviving funds in the category have less than $120 million in total assets. The biggest of the group, Scotia Latin American Growth Fund, is a midget by industry standards with about $34 million under management.

The Nikkei. Japan has been in the doldrums for so long and the Nikkei has raised so many false hopes that no one gets too excited these days when the key Tokyo index shows some strength. But maybe, just maybe, Japan has finally turned a corner. The Nikkei is ahead 9.7 per cent in 2004 and sho a one-year gain of 46.7 per cent. Again, investors in Japanese mutual funds are benefiting with an average one-year gain of almost 33 per cent.

Small-cap stocks. So far in 2004, small-cap stocks have been the stars of the North American markets. The Russell 2000 Index, which tracks U.S. small caps, was up 6 per cent in the first quarter, the best showing by far of any major American index. Here at home, the S&P/TSX Venture Index did even better, with a 7 per cent advance.

The S&P/TSX Composite. Despite our weakening economy, our benchmark stock index did much better than the Dow, the S&P 500, or Nasdaq in the first quarter, with a gain of 4.4 per cent.

Nasdaq. After a huge recovery in 2003 that carried over into the early weeks of this year, U.S. high-tech stocks paused to regroup. The correction so far has been mild: Nasdaq dropped 1.8 per cent in March to finish the first quarter with a 0.5 per cent loss. But the pull-back has left some investors wondering whether the technology rebound was too much, too soon.

The Dow. While U.S. small-cap stocks were rolling along, their large-cap brothers were taking a snooze. The Dow fell 2.1 per cent in March and is off 0.9 per cent year to date. The venerable index responded by announcing it is dropping three long-standing components: Kodak, AT&T, and International Paper. Joining the elite 30 will be drug-maker Pfizer, AIG Insurance, and telecom giant Verizon, who celebrated by signing Donald Trump to do commercials for them. Seems like Trump is everywhere these days!

Energy stocks. Americans are tearing their hair over $2 a gallon gasoline prices (welcome to the club folks). OPEC is cutting production. Refinery capacity is stretched to the limit. Everything should be rosy for the energy companies. But the stock prices are lagging. The S&P/TSX Capped Energy Index slipped 0.7 per cent in March. It still shows a gain of 6.7per cent year-to-date, but banks are doing better and they don’t have OPEC on their side.

Hong Kong. Everyone talks about the hot China market. Well, suddenly it looks rather tepid. Hong Kong’s Hang Seng Index tumbled 8.8 per cent in March, the worst monthly loss of any major world exchange. It ended the first quarter in the black for 2004 but only barely, with a 0.8 per cent advance.

Looking ahead to the second quarter, my bet is on the Dow. A strong U.S. employment report for March released on April 2 was welcome news and should provide good impetus going forward. There is also an expectation that first-quarter earnings reports will be strong. That would add more positive fuel for investors. All the big U.S. indexes should benefit but the Dow could do exceptionally well. This looks like a good time to buy Diamonds (AMX:DIA), which are a proxy for the index. Talk to a financial advisor before making a final decision.

This article originally appeared in the Internet Wealth Builder.