The month of April has brought a pause to the rally that had charged ahead through the first quarter. The Dow 30, S&P 500, and NASDAQ indices have all registered small losses in the last month. Could the market's sputtering performance mark the gathering of storm clouds for the coming months?

Federal Reserve Chairman Alan Greenspan cautioned that the budding economic recovery, while positive, may not usher in a return to rapid growth. Capital investment, not consumer demand, will be the engine of recovery, he said in a speech to a financial conference yesterday.

"The sharp reduction in capital investment in recent quarters has been driven largely by a marked contraction in corporate profitability. That appears to be changing at this particular stage and we're seeing the early signs of a recovery in capital investment," Greenspan said. He tempered that positive news, however, with a reality check: "I would be doubtful that the recovery is going to be rapid and in general (of) the overall economic recovery being rapid."

Against such a macroeconomic background, then, the Russell 2000's lone rise in the last month among major market averages is not surprising. Its small-capitalization component companies generally do not have the rich valuations that still dog large-cap stocks. Small-caps can be more nimble, too, in making the most of a slow-growing economy.

The Enron Effect also still lingers for large, complex companies. IBM and GE are two notable recent victims of questions about accounting and the challenge of continued growth. Insurance giant AIG saw its value slide, as questions about its accounting surfaced. Certainly accounting irregularities do not rise with a company's market cap; small companies can be overly aggressive, as well. The market preference, however, has been for the small, simple stock story, as Enronitis slowly, fitfully subsides.

In addition to small-cap stocks, a number of un-sexy sectors have done well in the last month: utilities, energy services, homebuilders, automotive, food and agriculture, consumer services, gold and insurance. A few sectors are noteworthy for their descents. Biotechnology and telecommunications stocks continue to settle from their bubble levels of a couple years ago. More established related pharmaceutical and software sectors have been hit, too, by the challenge of high price-to-earnings ratios and diminished growth rates.

Despite the mention of these sectors as relative outperformers, the most remarkable quality of April market has been its general lack of any trend. Trading volume has generally been only low to moderate, suggesting little conviction either way on the market's future direction. Such periods do eventually break loose, however, with a rise in volume powering a rally or an extended selloff.

Even market bromides are contradictory. "Never short a dull market." Stocks adrift can shoot up on good news with the sudden return of buyers and so many short-sellers still active. On the other hand, "sell in May and go away" remains one of the market's most enduring vacation ideas. Volume ordinarily surges from New Year's Day through Memorial Day, then tapers off for the summer as many traders and money managers leave Wall Street, returning after Labor Day. But with volume already light to moderate in mid-April, how much of a further falloff in volume is even imaginable?

One growing reaction to the befuddling U.S. market is clear: go global. Since September 11, foreign markets as diverse as South Korea and Mexico (see below) have rallied. More recently, European countries have joined the party (as exemplified by Switzerland, below). Remarkably, even Japan has experienced a surge, with its Nikkei index--which peaked in 1989 above 38,000 but had fallen to below the Dow 30 in February--now outpacing the Dow by 10% or more.

International equities may indeed steal the show from a U.S. market that is neither plummeting not rocketing upward but rather adrift on a pond of growing indifference from the average investor. After the Internet, biotech, and telecom bubbles, however, a little lack of interest is a welcome boost to the market's ultimate potential. It may be days, weeks, or even years away, but a spark will light and a sustainable rally will begin again. Until then, diversification seems the best way to reduce risk and maintain some hope of moderate gains.