While demand for equities has flagged in this market, bonds have remained a hot commodity. So you might expect a large brokerage firm, operating in this environment with substantial bond-trading and underwriting divisions, to perform pretty well. If so, look no further than Bear Stearns(NYSE: BSC).

The firm did well, indeed, announcing first-quarter diluted earnings of $2 per share. That beat estimates by 48% and its year-ago number by 55%. The large brokerage wrung the extra profits from strong revenues, which were up 22%.

Growth in its fixed-income and mortgage-backed securities businesses (the only source of growth left in a crushing, three-year bear market) drove the numbers upward.

Bear Stearns has been fairly insulated from the carnage due to minimal exposure to areas hardest hit by the downturn -- namely equity-related investment banking and the retail brokerage business. The firm also achieved success through focusing its trading strategies on those that profit from volatile markets, employing spreads and other options strategies that make money when prices rise or fall sharply.

The company's shares are near all-time highs on the heels of its exceptional performance, but if the market begins to turn and stocks rise, Bear will likely lag Goldman Sachs(NYSE: GS) and Morgan Stanley(NYSE: MWD), its more stock- and retail broker-oriented competitors.

However, if the overall stock market (with its valuation multiples remaining fair to high) continues to tread water, and bonds cool as interest rates hit 42-year lows, Bear will have to join its brethren in bear land.

Neither case is terribly favorable for the brokerage giants, so unless you're betting on an all-out economic recovery, be wary when chasing returns in this sector.