U.S. diversified stock funds gained 1.61% in November, propelled by a rallying stock market that pushed the S&P 500 to its third-strongest gain of the year.

It was a continuation of the rally that began in mid-October, leading to a 2.66% gain by U.S. diversified funds that month.

That rebound was driven by growing investor perception that the 9.83% pullback in the S&P 500 — just shy of a formal 10% correction — that occurred from mid-September through Oct. 15 had been unwarranted, said Russ Koesterich, BlackRock’s global chief investment strategist.

Large-cap growth mutual funds led U.S. diversifieds higher with a 2.67% gain, according to Lipper Inc. Their outperformance reflected investors’ perception that stronger GDP growth makes the U.S. a safe haven in comparison to most other markets, Koesterich said. S&P 500 index funds rose 2.65%.

Consumer services led all sectors with a 4.94% gain, reflecting consumer confidence. Precious metals funds rallied 4.45%. Consumer goods rose 3.63%. Science and technology funds advanced 3.54%.

Precious metals’ strong showing stemmed in part from investor bets on passage of a referendum that would have required a big boost in the Swiss Central Bank bullion reserve, said J.J. Kinahan, chief strategist of TD Ameritrade. The Swiss turned thumbs down on the question.

Better Than Usual

For the year to date, U.S. diversified stock funds were up 7.32%, above their average annual 6.07% for the past 15 years. It follows their outsized 32.30% gain posted last year. Large-cap core led the way with an 11.66% gain. The top sector for the year was health-biotech, with a 27.07% gain.

The strong recent performance, of course, raises questions about whether the bull market, now nearly 69 months old, can continue. Does the recent post-Thanksgiving pullback spell trouble for the market or do companies propelling stock funds still have more legs?

The case for continued gains rests on a foundation of favorable conditions. Among them, that long-term rates have been stable, Koesterich notes.

There’s been monetary accommodation from central banks, especially in Japan, Europe and the People’s Bank of China.

There have been two large M&A’s in pharmaceuticals and utilities.Actavis ( ACT ) said it would acquireAllergan ( AGN ). AndHalliburton ( HAL ) said it would take overBaker Hughes ( BHI ).

And we were seeing improvement in the U.S. economy, and continuation of a low-inflation environment not just in developed countries but also in China, Koesterich said.

The macroeconomic data were echoed by corporate earnings. Most companies reported pretty healthy numbers, said Lew Piantedosi, who runs or co-runs $12.3 billion, including $1.4 billion Eaton Vance Tax-Managed Growth Fund 1.1 .

And stock popularity got an additional boost from managers seeking to polish their year-end numbers. Some managers were still underinvested (after retreating in September and October), so they started to rotate back into stocks, out of cash or fixed income, Kinahan said.

He added: They don’t want to miss out. The S&P 500 is now up more than (11%) for the year (through Nov. 28), so there’s pressure on many managers to be more involved with equities with just about a month to go in the year. More pressure to match the S&P 500, most people’s measuring stick for the year.

India Was Tops

The average world equity mutual fund gained 0.40% last month. India region funds’ 2.41% gain on average topped all foreign equity funds.

The biggest November laggards were Latin American funds, which lost 4.33%.

Reflecting the broad market’s climb, S&P 500 index funds gained 2.65% last month.

Growth in general edged out value last month. IShares Russell 2000Growth Index ETF ( IWO ) gained 0.65% vs. a 0.48% setback for iShares Russell 2000Value Index ETF (IWN).

While not among the top leading sectors last month, financials posted a 1.10% gain.

Tech, financials, consumer goods and services — what you’ve seen is rotation back into cyclical, Koesterich said. Those are sectors that benefit from a strong domestic economy.

TD Ameritrade’s Kinahan said, Five years ago, old-line Dow Jones Industrials type stocks were the most important. Now it’s switched to where tech is, if not the single most important sector, certainly one of the three most important sectors. Our investors are interested inAlibaba (BABA),Apple (APPL),Facebook (FB),Twitter ( TWTR ). And there is spillover from those names to the whole sector. People look at chip suppliers, social media, and so on.

Piantedosi pinpoints Apple as the bellwether.

That stock has done well for the entire year, he said. And it’s had a nice run in the last month or so. That’s a function of its product cycle. The iPhone 6 will be a big hit. It will sell a lot in the holiday season. And the whole Apple food chain follows. Suppliers, semiconductor makers, chip companies.

Software has been pretty strong as well. We’ve seen good earnings numbers from many of them.

Tableau Software (DATA) is a beneficiary in that space, he said. They specialize in big data analytics, a great emerging trend, he added. He likes its earnings prospects starting in 2016.

Piantedosi sees hints of optimism on the hardware side too.

Even there, where there’s been pretty stagnant growth for a long time, we’ve seen signs that things might be getting better. Not much, but some, he said.

Look at desktop and laptop computers. Their limelight has been stolen by tablets in the past 12 to 18 months. But they’re starting to show some growth, Piantedosi said.

That aidsMicrosoft (MSFT) andIntel (INTC). They feed into the PC (sales) chain and will certainly benefit from any gains, he said.

Consumer stocks benefited from lower oil and gasoline prices. And consumers were already guessing that stable or lower energy prices would limit the impact of winter heating bills.

Consumer expectations of having more spending money have helped consumer stocks.

Costco is up about 20% this year.Wal-Mart Stores (WMT) rose 15% just last month.Target (TGT) gained 20% last month.

Consumer services advanced more than consumer goods last month because consumers felt safer buying clothes and some extra services for themselves than bigger-ticket items.

But that was a step toward consumers getting ready to spend more on housing and durable goods, Kinahan said.

Cheap And Unloved

Financials posted gains because they’re still very cheap and unloved, Piantedosi said.

And investors were hopeful that the midterm election strengthening of Republicans in the Senate and House would lead to a lighter regulatory atmosphere.

That’s also why some banks rallied, Piantedosi said.

Kinahan said, Some have done a marvelous job of staying lean. They’ve been able to make money in areas where interest rates don’t matter. When rates do go up, the sector will make more money. They’re hanging in there. The money coming into financials is not just short-term. You’re seeing longer-term bets.

Investors’ Outlooks

Investors’ outlooks are shaped by economic trends, especially in the U.S.

We’re generally optimistic that the U.S. economy will continue to improve, Piantedosi said. We’re optimistic that consumer confidence will continue to improve. It’s still below prior peaks, so there appears to be upside room before we get near irrational exuberance.

Investors will watch holiday sales for signs of any change in consumer sentiment, he added.

Kinahan expects the rally to continue through the first quarter. After that, it may be a rockier road. No. 1, there’s a lot of geopolitical risk that’s hard to predict.

And there’s a risk of European and Asian weakness infecting the U.S. economy.

Amid volatility, investors may tilt toward stodgier industrials whose dividend yields could look increasingly attractive. That could benefit names likeGeneral Electric (GE),Exxon (XOM),Verizon (VZ) andMcDonald’s (MCD), Kinahan said.

Through mid-2015, U.S. stocks should continue to benefit from easy money policies outside the U.S. Koesterich said. By mid-year, investors expect the Federal Reserve to start raising U.S. interest rates. That is likely to add fuel to volatility.

But investors can adjust without panicking as long as the U.S. economy is still improving, he added.

So in the second half of next year, Koesterich expects U.S. cyclical stocks — equities in tech, consumer and financial sectors — to outperform. Industrials geared to corporate spending should also do well.