Bear has outlasted nervous investors
By Amy Baldwin / The Associated Press / July 4, 2002
NEW YORK — It wasn't supposed to go on this long: 27 months. But many investors underestimated Wall Street's latest bear market, which has dragged on longer than the 1973-74 downturn that many veterans recall.
The bear is still raging, and there's no end in sight. And that leaves investors who were used to double-digit annual gains just a few years ago struggling with a different kind of reality.
"I don't even think we are close yet" to a turnaround, said Paul Desmond, president of Lowry's Research Reports in Palm Beach, Fla.
Stocks have been in a decline since April of 2000, and the selling has become ferocious over the past six weeks. But Desmond, who has done extensive research on bull markets, said Wall Street hasn't yet seen the mass exodus that signals the end of the bear and paves the way for the start of a new bull market.
"We are starting to see some increasing amount of concern on the part of investors," he said. "We talk to brokers who say they have had a particular customer come in and say to close their account. It is starting to happen, but we haven't reached the panic proportions we usually see."
According to Lowry's Research, all of the market's major bottoms since 1933 — including 1973-74 and 1980-81 — have two things in common.
First were several days of so-called panic selling in which downside trading volume accounted for at least 90 percent of total volume. Then came one session of super-strong buying when the reverse happened, as investors feared they had gone overboard in their selling. That combination hasn't happened yet in this market.
"I don't worry about it too much," said Steven Finnegan, a 29-year-old mortgage broker in Atlanta. "It just irritates me."
However, evidence is mounting that investors are unnerved, if not panicky. Trading volume has been heavy. Market indices have made new lows — the Nasdaq composite index this past week falling to levels not seen since May 1997. Meanwhile, the Dow Jones industrials have dipped below 9,000.
"One (financial) adviser told me that four of his clients just couldn't tolerate being patient and waiting anymore. They said, 'Get me out," ' said Kathleen Gurney, chief executive of financialpsychology.com, a market research and consulting firm in Sonoma, Calif.
"I have never seen it this bad," Gurney said of investor confidence.
"The market has to go through a period when people say, 'I don't care about the quality of stocks. ... I just want to get away from the stock market,' " Desmond said. "It is a totally irrational decision to just throw away stocks."
Whenever this bear market suffered a day with downside trading volume of 90 percent, the last one being in April 2001, subsequent sessions have brought rallies but not the powerful sort that Desmond says are needed. That's why he expects the bear market to drag into next year.
"It is hard to see how much worse it could get," said Peter DiTeresa, senior fund analyst for Morningstar, a Chicago-based research and investor services company.
"It is often the case at that tail end of a bear market that things get really ugly before they get better," DiTeresa said.
Analysts who thought the bear market would end this year now say it might last into 2003. As for those double-digit returns, it's going to be a while. Expectations are for several years' worth of low single-digit returns.
Finnegan, who loaded up on tech stocks weeks before they peaked in March 2000, also lamented, "I was lured by greed."
"I thought I would have 40 or 50 percent returns with tech stocks vs. 20 percent with blue chips. In reality, I should have been happy with 8 percent." |
