Be careful about investing with your eyes on the rearview mirror. Changes in winning and losing investments have come so swiftly of late that you might not have realized your favorite approach has backfired lately.

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Be careful about investing with your eyes on the rearview mirror.

Changes in winning and losing investments have come so swiftly of late that you might not have realized your favorite approach has backfired lately.

International funds — the hot funds of the last few years — have turned more disappointing than U.S. stock funds. Gold has lost its luster or, more precisely, more than $200 since climbing above $1,000 an ounce a few months ago. Oil is in a bear market — a decline of 20 percent or more. Small-cap funds, which typically would be shunned during rough economic times, have been on a roll.

The last few weeks have shown why financial planners try to discourage clients from loading up on a few winners while discarding everything else. They know that changes in cycles can come quickly and without warning, turning winners into losers and vice versa.

Many analysts are confessing their surprise about the twists of the last few weeks. It now appears that the globe is not immune to U.S. economic problems, although that was a favorite theory until a couple of months ago. It also seems that oil isn’t immune to changes in demand: When prices of gasoline rise too high, consumers cut back on car and airplane trips and the price of oil falls, even though supplies on a long-term basis are limited.

Analysts are in the process of re-examining their assumptions.

“In a nutshell, the balance of power (either bullish or bearish) remains fragile,” JPMorgan strategist Thomas Lee said in a report. “The volatility of equity markets in the past week is a reminder of the conflicting balance of issues weighing on the market — from weak housing, tightness in credit availability, slowing Eurozone and emerging markets that is offset by weakening oil, strengthening dollar, steepening yield curve and hoarding of cash from corporates.”

A money manager put it this way: “It’s as though we are balanced on the head of a pin, but we don’t know which way we will fall off.”

That analogy means that it’s not clear if the fundamentals working against some favorite investments will stay troubling, or change.

But rather than just hope for the best, realize that analysts are spotting changes in some of the fundamentals that may have driven your investments higher, and perhaps add some insulation with a fuller array of choices.

Commodities

Over the past month, the CRB commodity index has entered bear-market territory, according to Bespoke Investment Group.

Oil has been in the headlines, but the plunge extends throughout the commodities that had been so good to investors. Recently, nickel was down 46 percent, wheat down 41 percent and natural gas down nearly 39 percent.

The only commodities that Bespoke found holding up near their highs were live cattle and hogs.

Bespoke says that bear markets in the commodity index have averaged declines of 25.6 percent over 375 calendar days. And an interesting point for investors who abandoned the Standard & Poor’s 500: While commodities decline, the S&P — on average — climbs 18.9 percent. And the health care and consumer sectors do best, averaging gains of 30 percent.

When commodity prices were rising, it was painful for companies that were afraid to pass on higher costs to consumers. But Bespoke notes that many have made the adjustments and will likely benefit from charging higher prices as commodities — and, therefore, costs — go down.

Gold

Gold attracts investors worried about inflation and the value of the dollar. With both concerns falling off lately, so has gold. From over $1,000 an ounce in March, it has dropped more than $200.

Inflation is gearing down as countries throughout the world see slowing economies in response to the U.S. credit crisis.

“Inflation always recedes with a lag once a recession begins and the deceleration continues well into the early stages of recovery,” notes Merrill Lynch economist David Rosenberg.

While the recent 5.6 percent annual inflation rate was the highest since 1991, Rosenberg estimates it will be below 2 percent this time next year.

Goldman Sachs economist Andrew Tilton expects inflation to peak in August, although it could come a little later.

“Global demand has been falling, with negative reports coming from the euro region, Japan and some emerging markets,” notes BlackRock Vice Chairman Bob Doll. “The silver lining to all of this is that anemic growth should result in lower inflation.”

Of course, people have also bought gold to hedge against the financial crisis in banking and geopolitical concerns that are difficult to predict. Still, Rosenberg, who is worried about a slowing economy, said, “We see gold down to eight-month lows.”

International vs. U.S.

During the last year, the strong returns in international markets have been erased by concerns about slowing growth and even outright recession in places such as Germany and Japan.

As a result, the average diversified international fund has lost 17.6 percent this year, compared with 11 percent for the average S&P index fund, according to Lipper.

If the dollar is indeed strengthening, as some analysts believe, investors may do even worse in international funds in the months ahead.

That’s because the money people make in international markets will be converted from the local currencies to dollars. With dollars worth more than they have been, compared with the euro and some other currencies, the money made in foreign currencies won’t receive the extra boost that’s been so profitable to U.S. investors.

The best strategy: Hedge your bets by holding both U.S. and international funds. Financial advisers often suggest dividing stock money up 75 percent in the U.S. and 25 percent abroad.

Large caps vs. small

The formula for a difficult U.S. stock market has been to buy large U.S. companies with substantial sales abroad. In theory, during rough economic times, small caps can struggle more than large companies because they have less fat to cut, and can be vulnerable if they lose one or two major customers.

Yet, in contrast to expectations, the Russell 2000 index has climbed 7 percent during the last month while large U.S. companies are up less than 2 percent. It’s still an early trend, and hedge-fund analyst Mary Ann Bartels notes it has been driven partly by large speculators covering “short” positions, or reversing a bet against small caps.

Some analysts have also guessed that small caps may be rising because their costs are now coming down as commodities decline. And if the dollar stays strong, large multinationals won’t receive the benefits they have derived from attracting customers with cheap prices abroad.

Within small caps, Merrill Lynch strategist Steven DeSanctis said, technology stocks are the cheapest and should be the most immune to the ongoing credit crunch. And small industrial companies could face the challenge of the stronger dollar when competing for sales in a global marketplace.