An Overview of the Market: Thoughts For Today's Investors

When J.P. Morgan was asked what he thought the market would do, in his usual haughty manner, he snapped back, “It will fluctuate.”*
When this answer is placed with the recent stock market as a backdrop, you realize that never a deeper truth has been spoken concerning the equity markets.
Although no two major market events are ever the same, they sometimes possess some similar characteristics from which we can hope to learn.
This is because underlying this answer is the realization that the markets are generally cyclical. If we can understand this simple truth; that markets go up and that markets comes down, we would understand why panicking when the stock market retreats has historically never been such a good idea.
The real issue in bear markets is that when the market is down, many times it feels as if it will be down forever. However, no matter how bad a market feels at its lowest point, it has historically recovered creating wealth for those who did not panic out of their well-planned investments.
A good example of this was back in 1979, when Business Week ran a cover story on "The Death of Equities." This magazine cover and article was published on August 13, 1979 and was on the very door step of the beginning of one of the best bull markets in the history of equities. In this article, Business Week suggested, "The death of equities looks like an almost permanent condition." The next year, in 1980, the S&P 500 was up 32.5% and the rest of the 1980s and 1990s are now historic in terms of market returns.
If history provides any implied qualities, one of the principal lessons is that if you are an investor with equity positions, odds are you should probably stay the course; otherwise, you likely may miss the upswing in the market that may potentially occur after the bear market. You need look no further than the last bear market which ended in 2002, at which time we saw a 28.7% return for the S&P in 2003.
The question is what do you do now? Particularly in this current market and with the volatility and uncertainty that surrounds it. No one has the crystal ball that will tell you exactly what to do or can predict its outcome. We believe that the best thing you can do is use the common sense wisdom that we have learned from other markets we have seen that possess some similar characteristics to the one we are in now. Stay focused, do not try to time the bottom of the market, stay diversified and understand the long-term view.
Historically, all bear markets eventually end. Although no one knows exactly when, this bear market should end too. When it does, it should display the relatively strong characteristics that the equity market has provided in the past. We do not believe that you should put yourself in a position of watching that from the sidelines.
According to the Stock Trader's Almanac, the last 10 bear markets have lasted, on average, 369 days. The most recent bear market which began in October 2007 is approaching that average number of days, although no one can accurately predict when this current bear market will end.
In difficult times like this, we believe it's important to invest with your head and not based on emotion. Stay the course and finally, remember that many times in the past, the bull market typically began when things looked their bleakest.