SmartInMoney

 

 

 

The current seventeen months bear still rules the market and has hurt investors badly. Just recently on Mar. 9 the S&P 500 index was at 676.53, its 12-year low, after losing than 56 percent from its all time peak on Oct. 9, 2007. Many severely wounded investors have fled the stock market and abandoned their long-term investing strategy.

 

Over past four trading days, the S&P 500 rallied 11 percent, closing the week at 756.55 on Mar. 13, recovering from the 12-year low reached Mar. 9.

 

 

While U.S. and global financial markets still struggling to recover from one of the worst financial crisis, investors are wondering whether this market hit bottom already and the bear market is over. While no body knows when the bear will end and a recovery will occur, history shows that being out of the market can be costly. A lesson from market history teaches that every bear has a bull.

 

A bear market is defined as a decline of 20% or more in the Standard & Poor's 500 Index over at least a two-month period.

 

The current economic environment is still grim indeed, and significant job losses are expected in the coming months. But economists are confident that the economy and the financial markets will regain strength over time as U.S. policymakers continue their extraordinary efforts to heal the economy and restore confidence. The historic size of the commitment, including trillions of dollars' worth of fiscal stimulus, monetary easing, and direct bank support, would appear to promise eventual accomplishment.

 

The one year after the bear charts reveal that in all but one case of the nine bear markets that occurred between 1950 and 2003, the market recovered dramatically within one year of hitting bottom. Investors who were patient during periods of stress and dislocation were eventually rewarded for taking risk over the bear markets. The bear markets have been buying opportunities.

 

History suggests that if you're patience and lucky enough to have a quite long time horizon, there's reason to believe you'll benefit from not fleeing the bear market and sticking with your long-term investing approach.