After witnessing a nearly 70% gain since the market s bottom in March 2009, investors are finally pulling back. The market is down about 4% since the Standard & Poor s 500 index peaked in early January. Last week, Federal Reserve Chairman Ben Bernanke plotted out how to unwind the various stimulus vehicles that have been largely fueling the economy over the past two years. Meanwhile, investors have been fleeing risky investments as sovereign debt concerns spike in Europe. Although this retreat has helped beef up the value of the U.S. dollar, while dampening commodities, the overall cool-off isn t unwelcome. Here s why at least two brokers think the market correction bespeaks future gains:

Who s Talking
Liz Ann Sonders, Senior Vice President, Chief Investment Strategist, Charles Schwab & Co.

The Gist
Thanks to the recent correction, a healthy dose of pessimism has kicked back into investors sentiment.

While the correction has likely washed out some of the more speculative investors, those remaining will be left with a more solid foundation during the next leg higher, says Sonders. In our view, [the correction] has been relatively healthy, and for longer-term equity investors, should be welcome, she says. At the start of 2010, investor optimism, which had surged alongside the market, reached levels that were concerning. By mid-January, for example, the Ned Davis Research Crowd Sentiment Poll showed 69.8% bulls, up from 30.9% bulls in early 2009. That kind of jolt of optimism has been a contrary indicator in the past, Sonders says.

Dim perspectives may be dominating today s markets, but signs of economic improvements persist. Manufacturing, which tends to lead the overall economy, continues to show strength, as last week s reading of the January ISM Manufacturing survey came in at a better-than-expected 58.4 a figure that indicates robust manufacturing growth. This week revealed that U.S. housing starts in January reached the strongest level since July 2009, while industrial production readings beat analysts estimates.

The fact that investors have cooled off is a good thing, says Sonders. We've written in the past about the need for markets to pause after 2009's strong run and that we expected volatility to increase in 2010, as stimulus exits neared, she says. Although added volatility will likely only drive the dollar higher -- and keep a lid on other currencies -- investors should preserve some exposure to international markets to maintain the benefits of diversification. Investors need to have a diversified portfolio that's appropriate for their own risk tolerance, says Sonders. Times like this can be a good test as to how much risk an investor is really willing to take.

Who s Talking
Jeffrey Kleintop, Chief Market Strategist, LPL Financial

The Gist
The tailwinds that helped the markets sail higher for much of 2009 are dying down. Today, investors see their path a little choppy, as headwinds from rising global frictions continue to rise.

Kleintop expects the market to weaken in second half of 2010, as the policy efforts that bolstered the economy up until now fizzle out. Indeed, the early stage of this transition is already underway leading to heightened market volatility.

Also contributing to investors woes is the anti-business tone coming out of Washington and the uncertainty surrounding financial regulatory reform. The unemployment rate, at 9.7%, remains high, while the ascending deficits of various countries including the U.S., signal higher risk. The budget deficit is soaring leading to potentially higher interest rates and consequently crowding out private borrowers, says Kleintop.

Despite this dread of what the markets will do during the latter half of 2010, like Sonders, Kleintop also points out that the country s economic improvements shouldn t go unnoticed. Not only did the U.S. economy grow at a strong 5.7% clip in the fourth quarter, the country is on track to post above average results in the first quarter. It s important to note that that growth was led by business spending, export growth, and a drawdown of inventories -- all indications that the U.S. economy is not solely dependent upon government spending, says Kleintop. Further, company earnings continue to outpace expectations. The average company reporting fourth-quarter results is beating earnings estimates by 12%, he says. Plus, the collective profits of the companies within the S&P 500 have more than tripled. Excluding financials, they are still up 16%.