U.S. and foreign equity mutual funds hit 10-year records in the second quarter, with domestic equity funds rising 17.05% and international equity funds rising 26.66%, according to Lipper. For both, it’s the best performance since the fourth quarter of 1999, when U.S. equity funds surged 19.47%  and world equity funds delivered 27.42%.

The best-performing U.S. style category was small-cap value funds, which rose 23.37%, and the No. 1 sector was international real estate, up 33.89%. Among international funds, Latin America beat out all others, soaring 44%, followed by China, up 37%.

Year-to-date, the average U.S. stock fund is up 6.51%, but due to the downturn of 2008, the 10-year record is flat.

But some managers greeted the outsized performance with skepticism, with Mark Giambrone, manager of the USAA Value Fund, telling Investor’s Business Daily, “If things don’t get better, the market may have gotten ahead of itself on a short-term basis. At the bottom, we priced in the worst-case scenario, like the nationalization of banks, a protracted recession and no liquidity for any company regardless of quality.”

That said, other managers believe the market will not return to the lows it reached on March 9. Bob Millen, co-manager of the Jensen Portfolio, commented, “In the last eight recessions, going back to 1953, the average for the S&P to recover from the low to prior high was 1.9 years. The recovery ranged from 83 days to six years. We’ve got a long way to go, but the general trend should be upward.”

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