As stocks that make up the Dow Jones industrial average once again flirt with the 13,000 mark, local analysts say they expect the market to continue the winning ways that have doubled investors' money in three years and placed the benchmark within striking distance of record highs last seen five years ago.

The Dow Jones average finished last week at 12,977.57, after closing Tuesday above the 13,000 mark for the first time in more than four years. The bellwether of 30 leading New York Stock Exchange equities is up more than 6 percent so far this year.

"Corporate profits are very high," said Tom McGuigan, principal of Burns Advisory Group in Old Lyme. "The stock market has rebounded significantly and fairly quickly."

The stock market groveled at a low point of 6,443.27 on March 6, 2009, riding a long slide of disastrous days after the financial panic of 2008. The market hit its peak on July 19, 2007, when it closed at 14,164.53.

"How quickly things can change," mused McGuigan. "The market turned around on March 9 (2009). Why did it stop falling? Who knows."

Josh Lyons, principal of Lyons Asset Management in Stonington who has a satellite office in Savannah, Ga., said corporations became "leaner and meaner" in the wake of the financial panic and subsequent recession. The result was layoffs and unemployment among the masses, he said, but a stronger base for corporations to come out of the economic morass in relatively good shape.

Right now, companies in the Standard & Poor's index of 500 stocks are at all-time highs for profits - better than before the financial crisis.

"We learned of the resiliency of corporations," McGuigan said. "They cleaned up their balance sheets quickly. It's really a remarkable story."

And Bill Middleton of Sound Portfolio Advisors in Mystic said he believes corporations, sitting on enormous stockpiles of cash, are poised for even more gains. Stocks, he said, are undervalued and under-owned, with fixed-income securities and commodities seeing better returns over the past few years.

Stock-price increases, he and others said, have lagged partly because of a behavioral effect that gives greater weight to recent experiences (the dive of equities) than to historical trends.

"Fear is stronger than greed," Middleton said. "People aren't even sure what they're afraid of - they're just afraid."

Yet Middleton said stock prices today are low compared to corporate earnings. The so-called price-to-earnings ratio of S&P 500 stocks is now less than half what it had been a few years ago, meaning equities could double this year and still be relatively low-priced compared to values in headier times.

Lyons, however, noted that good trends in the stock market don't necessarily translate into better times ahead - though spikes in equity values sometimes have presaged a stronger economy.

"We have to separate the economy from the stock market," he said. "There are still some dark clouds - don't get me wrong."

Chief among them is the state of the real estate market, which has been hit by foreclosure problems and dramatic drops in values. But Middleton said people can't defer the formation of households forever, and real estate values combined with a low mortgage-rate environment are bound to become irresistible at some point.

"When you look at real estate prices and interest rates, it's incredible," he said.

In addition, Middleton said, America looks as though it could see a revival of its manufacturing base if energy prices continue to rise and importation therefore becomes more expensive. He added that American companies may benefit from China facing the inevitable challenges of growth without the "creative destruction" mechanisms of capitalism - such as bankruptcies and restructurings - that allow countries such as the United States to bounce back quickly from difficult times.

Local financial advisers said they believe U.S. companies large and small likely will outperform most of the world in the course of the year.

"We're in a time when American ingenuity is coming back," Lyons said.

Some said a proposal to lower the tax rate U.S. companies pay to repatriate profits currently kept overseas - a plan favored by Republican presidential candidate Mitt Romney but opposed by President Barack Obama - could add a bit of stimulus to the economy, increase dividends paid to investors and spur a flurry of mergers and acquisitions as well. All of these effects could boost the stock market even more than expected over the next year, they said, though it is unclear whether it would result in the number of additional jobs that some politicians predict.

The advisers also said they were unsure what effect the presidential election will have on the stock market, but none thought the result would be a game changer.

Instead, investors likely will focus on increasing consumer confidence, decreasing unemployment and - thanks to the market shocks of the past few years - more responsible financial stewardship of the country and of individual budgets.

Of course, said the advisers, a steadily rising stock market wouldn't hurt, either.

"I think Dow 13,000 is a really positive thing," Lyons said.

The sad part, he and others noted, is that so many investors bailed out during the panic and missed the boat when stocks began to rise again.

Middleton said he believes most people think the past three years have been horrible for stocks, when in fact equities have doubled in price. He cited famed investor Warren Buffett as saying that people who aren't ready to sustain 50 percent in paper losses and still sit tight shouldn't buy stocks.

"The lesson you learn," Middleton said, "is that stocks are volatile, and that's the price you pay for higher, longer returns."

l.howard@theday.com