Thursday July 4, 10:33 am Eastern Time
Associated Press
Bear market still raging -- 27 months and no end in sight
By AMY BALDWIN
AP Business Writer
NEW YORK (AP) -- 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.
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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, Florida.
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, there were several days of so-called panic selling in which downside trading volume accounted for at least 90 percent of total volume, and then 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.
Even as the market is poised for a possible third straight year of declines, some investors say they are concerned, but not too scared.
"I don't worry about it too much," said Steven Finnegan, a 29-year-old mortgage broker in Atlanta. "It just irritates me."
Finnegan isn't cashing out his investments, even if they are 50 percent below their peak of $250,000. Rather, he is investing less these days, mostly sitting on the sidelines with many other investors, waiting for signs it's time to start buying again.
"I don't put as much effort into looking into my portfolio right now," Finnegan said.
However, evidence is mounting that investors are becoming increasingly unnerved, if not panicky. Trading volume has been heavy. The market indexes have made new lows -- the Nasdaq composite index this past week falling to levels not seen since May 1997 as well as below its post-Sept. 11 closing low of 1,423.19. 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, California.
"I have never seen it this bad," Gurney said of investor confidence.
Still, if bear market history repeats itself, many more investors have to get to that point of capitulation.
"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 analysts for Morningstar, a Chicago-based research and investor services company.
Yet he's well aware of how surly reputation of bear markets.
"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.
Investors are struggling to adjust to the fact that even when the bear market ends, the heady days of the last bull market won't soon return.
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." |
