NEW YORK (Money Magazine) - March 10, 2003 marked the three year anniversary of the Nasdaq peak -- on March 11 the index began a 20 percent run. Over the same time, the S&P 500 is up 17 percent and the Dow is up 14 percent.

That's not even close to making up for all the losses since 2000, but the latest run has some wondering if we've entered into a new bull market.

How healthy are the market's underpinnings? In the latest issue of Money Magazine, writer Stephen Gandel identifies six reasons to be sunny about stocks, along with four factors that could temper enthusiasm.

1. PROFITS ARE BACK UP Profit margins, the percentage of sales that actually make it to the bottom line, have been widening steadily at most corporations for some time. That's because the restructuring initiatives of the past couple of years -- shrinking head counts, closing unprofitable operations and reducing debt -- are finally paying off. The last time there was a turnaround in profit margins was in 1992, and it helped to set the foundation for the late-1990s bull market.

The biggest winners The S&P 500 has moved 17% since its latest low on March 11. Here's who's leading the charge. Stock  Gain  Avaya (AV)  137.3%  Dynegy (DYN)  120.5%  Delta Air Line (DAL)  107.4%  AES Corp. (AES)  106.6%  Concord EFS (CE)  90.0%   Gain from March 11 through May 9. Excludes stocks with starting price less than $2 and market caps below $500 million.  Source:  Standard & Poor's

2. OIL IS BACK DOWN The price of oil has dropped some 30 percent to a recent $25 from its high in mid-March, when it was feared that Saddam Hussein would torch Iraqi oil wells and significantly crimp the world's supply of petroleum. Cheaper oil means more money in consumers' pockets, as well as lower manufacturing and shipping costs for many companies. It is the ultimate economic lubricant.

3. TAX RELIEF The debate is still raging, but we're convinced that Congress will pass a tax cut of some kind and President Bush will sign it. The fiscal stimulus will boost the economy and, if taxes on dividends are cut, investors in particular.

Bringing up the rear Only two dozen S&P 500 stocks are in negative territory since March 11. Here's who's furthest behind. Stock  Gain  RJ Reynolds (RJR)  -22.9%  HCA Inc.  -20.7%  Baxter International  -18.9%  Intuit  -15.1%  Altria  -12.2%   Gain from March 11 through May 9.  Source:  Standard & Poor's

4. SCANDALS ARE ABATING Yes, newspaper headlines still blare about accounting fraud and corporate malfeasance, but the wrongs being highlighted are years old. As aggressive regulatory and enforcement efforts take hold, the number of future scandals should be fewer -- and trust in current corporate accounting and results should rise. Already many professional investors, such as Robert Olstein of the Olstein Financial Alert fund, believe the earnings that companies are reporting now are of significantly better quality than they were three years ago. (See more on earnings quality.)

Best of the Biggest The higest gains among the largest companies by market cap. Stock  Gain  American Int'l Group (AIG)  26.5%  General Electric (GE)  24.2%  Citigroup (C)  23.8%  Intel (INTC)  23.5%  Cisco (CSCO)  22.5%   Gains from March 11 through May 9.  Source:  Standard & Poor's

5. EVEN THE DOGS ARE BARKING Given the national preoccupation with the war, March was basically a write-off. Still, first-quarter earnings results so far have come in generally better than expected. Moreover, even companies that have had a tough go of it lately, such as AT&T, Lucent and J.P. Morgan Chase, booked surprisingly good results.

6. A FALLING DOLLAR The drop in value of the dollar, which has been slipping for a year, may be a good thing. A cheaper dollar makes U.S. goods more competitive abroad and raises the price of imports, making them less appealing to domestic consumers. It also boosts the value of sales garnered overseas. (See the latest on the dollar.)

1. SARS The biggest and most unquantifiable risk right now is the impact that the respiratory disease SARS will have on world trade. Even so, reactions to never-before-seen diseases tend to be overblown in their early stages.

2. JOBS Unemployment continues to rise. Does that mean we're headed for a double-dip recession? Probably not. In early 2003 the weather was crummy, the consumer was scared stiff and we were heading into war, yet the economy grew 1.6 percent. As for job cuts, they tend to continue well into a recovery. In 1992, a million more people were unemployed while GDP grew by 4.4 percent. (The latest on employment.)

3. THE DEFICIT Higher budget deficits hold the prospect of rising interest rates, which in turn can weigh down stock prices (they hurt bonds even more). Still, investors lived with large deficits for some 20 years, and it didn't stop stocks from rising.

4. LOCAL SHORTFALLS In order to fund their own budget deficits, state and local governments are raising taxes. That could negate any benefit from the federal stimulus package. The hope: Additional local levies and higher property taxes will vanish when the economy picks up steam.

Overall, we feel confident that the worst is behind us and that the future is brightening. This doesn't mean that we expect the stock market to skyrocket the way it did in the late 1990s, when falling interest rates served as jet fuel.

But for any long-term investor, having less than 60 percent of your portfolio in equities is overly cautious. Bonds and money-market accounts (and even real estate) are far less appealing today than stocks.

As Smith Barney's Tobias Levkovich, one of the few remaining bullish market strategists, notes, "I'd rather invest in a period where there are some clouds on the horizon. As they dissipate, the rays of sunshine come brightly through." If you wait too long, you may miss the best part of the run.