The market is rallying! The market is rallying! The Dow Jones Industrial Average is now above 9,000 from its low of 6,547 on March 9. A major part of the rally has been the zombie-like resurrection of previously embattled stocks such as American International Group, Citigroup, Fannie Mae and Freddie Mac. Since many investment advisors think at least some of these firms have hit their highs, this rally won't last.  On the New York Stock Exchange this afternoon, the top five traded stocks by volume were Citigroup ( C - news - people ), Fannie Mae ( FNM - news - people ), Bank of America Corporation ( BAC - news - people ), Freddie Mac ( FRE - news - people ) and American International Group ( AIG - news - people ), Inc.. These stocks altogether made up 26.4% of the volume traded on the exchange this Thursday, with Citi's stock making up more than half of that alone. As we've noted before when volume is concentrated among a handful of stock it is often a bearish sign.  Hilary Kramer, chief investment officer of A&G Capital Research, doesn't give the rally much credence because the market went up too high too fast. "This is a mini bull market stampede in a global recession," she says. The fact that stocks from AIG, Citi, Fannie and Freddie went up as much as they did shows "the unsophisticated nature of investors who are following the herd and being led off the cliff," Kramer says. She adds, "Fannie Mae going up meteorically is just traders having a good time with a stock and seducing small investors into the fold."  In case you haven't guessed, Kramer advises investors to stay away from the previously mentioned companies. For investors who already have these stocks--sell them. "If you've made money, take your money and run," she says.  Follow Intelligent Investing On Twitter  Sign Up For The Daily Intelligent Investing Newsletter  Though Kramer doesn't think Citigroup is going under, she still considers the company "dead money" because of all of the firm's lingering commercial and other real estate problems. Citi has over $300 billion in toxic assets and moving those assets around between Citigroup and Citi Holdings is just "throwing toxic assets from the right hand to the left," she says.  AIG is in a similar pickle because its future business has dim prospects as insurance brokers have no incentives to put clients in AIG insurance policies, Kramer says. A recent Bernstein report downgraded AIG from market perform to underperform strictly because of the big run up in the stock's price. The report cites the real possibility that the government will reduce its monetary support once AIG doesn't look like it will topple our financial system. "We still think the political risk is considerable, with a very real possibility that the government reduces support once AIG is no longer deemed a systemic risk," said analysts Todd Bault, Timothy Connor and Samir Khare in the report.  There will be no sustained rally until 2011, Kramer predicts. A real rally happens when the excess real estate supply has been sopped up and when small businesses and consumers have access to capital.  Lynn Phillips-Gaines, founder and head of a Raymond James financial services firm in Mississippi, also doesn't hold much hope for a continuing rally. "We think the market has rebounded and to expect the same going forward could be dangerous," she says. She is preparing clients who have a five to seven year time horizon for their investments to be prepared for a "two step forward and one step back" kind of progress.  So why did these stocks experience such a rally? It was likely hope, says Greg Ghodsi, head of the 360 Wealth Management Group at Raymond James. Any further movements in the market will need to be based on top-line growth, he adds.  Citigroup might not be a bad investment if you look at it as investing in a synthetic exchange-traded fund, says Bill Singer, shareholder at Stark & Stark law firm. Considering the current portfolio that Citi has with international and national debt and equity, investors can look at this as a way to diversify and get debt exposure. Overall though, Singer doesn't hold out much hope for Citi, although selling off its parts might make the stock for the company as a whole go up. Citi Holdings sold its entire ownership of three North American partner credit card portfolios on Aug. 31, although terms of the deal were not disclosed.  Singer doesn't invest in the financials now and doesn't anticipate doing so anytime soon. That being said, he feels AIG is a more sound investment because, though it does have embattled businesses, its insurance business is sound. Since AIG hasn't gotten as far away from its core business as Citi has with its core banking business, Singer believes in the "integrity of the construct of AIG."  Forbes: There has been a lot of attention to the fact that stocks considered junky, like Citi, Fannie Mae and Freddie Mac have been very strong during this recovery. But do you buy into this idea? After all, even if a whole lot of junky stocks are doing well the stock market itself is enormous, worth some $10 trillion, or so. So do you think this is a junky rally or a rally rally?  Lynn Phillips-Gaines: As we meet with clients and review their investment policy statements, we try to temper their resurfacing enthusiasm for more of the same market advances as we progress into the final part of 2009. We think the market has rebounded and to expect the same going forward could be dangerous. All of our clients who have positions in the market have a time horizon of over five to seven years and we are making sure they are prepared for a two step forward and one step back progress. I am trying to manage expectations. Clients seem to go from extreme to extreme emotionally.  We are also making sure our clients who are traditionally higher quality portfolios of dividend producing stocks understand that this part of the market has lagged and that it has been the lower quality/higher risk issues that have moved ahead. I think there are very real opportunities in this part of the market because they haven't gotten the big pop that the growth stocks have had. (I like international as well as domestic here as a class of stocks. I do not do the individual stock management, so I don't feel comfortable giving you exact names of companies.)  We are dollar cost averaging in NEW money over the next 10 to 12 months where people have new money to invest, if they already have a diversified portfolio. And we are making sure we have weightings in international high quality stocks. And if they don't have any money committed to the market, we are going in with most now because I think longer term, they will benefit significantly.  Greg Ghodsi: Rebounds in the market usually start with the lowest quality stocks. The same thing happened in this rally. Banks/financials rallied first then builders and retailers. In my opinion much of the run in FNM and AIG has been hope and many people are piling into the hope trade. No question the markets are more stable and people are looking forward again. The bottom line is the next move probably will be based on top line growth.  Forbes: Hi Greg, do you think this hope in AIG and FNM is justified?  Ghodsi: Based on the moves it looks like a long-term call option. In my opinion you have a long way to go before the equity is worth anything. From my understanding the government must be repaid before there is any real equity value.  Get Intelligent Investing On Your iPhone  See More Intelligent Investing Features
The market has rallied since its severe lows with the help of Citigroup, AIG, Fannie and Freddie. Since these stocks have likely reached their peaks, the party's over.