Bear Market

WITH THE DOW JONES industrial average this morning having slipped 268 points from its peak -- down 154 points in the past four sessions -- many observers ask, "Is this the start of a 'bear' market?"BEARS' DEN: "We're now seeing prolonged signs of a classic market top." (John Bollinger, CNBC, late yesterday)"Historically, best election year strategy is -- sell your stocks. Tough decisions by the President, Congress and Fed get pushed off until after election. Candidates raise everybody's hopes -- then reality sets in."

Last Friday, the Labor Department reported that 236,000 new jobs were created in February. That's good news -- but not nearly good enough. Even if this rate were to continue, which seems unlikely, the United States wouldn't be back to pre-recession levels of unemployment for another four years. American workers remain in a bear market. More than 12 million Americans are still without work. Another 8 million are working part time but would rather be working full time. Many have given up looking.

Are we in a bear market? "It depends on which group of stocks you invest in and which definition you use," says Hulbert Financial Digest. "If Nasdaq's mostly high-tech stocks are your focus, and you rely on the traditional definition of a bear market as any decline greater than 20 percent from its high, then you're most definitely suffering through a bear market." "Tech stocks are maddening," says Family Money. "They're up, down; hot, then not. But they'll make you rich if you invest smartly: "Invest only 20 percent to 40 percent of your stock portfolio in technology.

Investors of all ages have seen their portfolios take a hit in this bear market. But will losses have a greater effect on younger investors, making them less likely to buy stocks in the future? Some academics think so. With little investing experience under their belt, young investors might conclude they should avoid stocks after last year's market plunge. Yet, if history is any guide, young investors could become big winners if they invest in stocks during a bear market and reap the rewards when those shares appreciate later in a bull market.

A416-point stock market rally Tuesday seemed to rescue investors from the bear's claws, but they have to wonder if the beast is gone for good. Many analysts aren't sure the surge was anything more than one of the powerful rallies that often come during bear markets, only to see stocks turn down again. Last week's rally was set off by an innovative move by the Federal Reserve to relieve some of the tensions on lenders and get money flowing to borrowers by letting lenders use distressed mortgage-related bonds as collateral for loans from the Fed. But stocks remain well below their record highs; a common view is that a recession is now unavoidable and the bear market has not run its course.

It's official. We're in a bear market. Now what? If you have done all those boring things that financial planners nag about, like making sure you have a diversified portfolio, you should be in good shape to weather the downturn. You might even be in a position to snap up bargains in the stock market while prices remain low. But if all your money is tied up in a narrow selection of stocks, you may be in for one of those hard lessons that bear markets deliver. A bear market is generally defined as a 20 percent decline from the most recent market high.

A BEAR MARKET -- typically a drop of at least 15 percent -- can be agonizingly long or mercifully short.Research discloses that the 1961-1962 Kennedy bear market showed a decline of 29 percent, as measured by the S&P 500 stock index, but lasted only six months.A severe Wall Street plunge in 1973-1974 pushed the S&P 500 down 48 percent (the equivalent of about 500 S&P points today and a setback of about 4,000 Dow Jones points) and lasted 21 months.It took 64 months for the market to regain its previous high.

WOULD you like to "bear-proof" your portfolio? Bloomberg's Personal Finance, December, lists these issues under "Bad News Bets," explaining, "These companies are least likely to be affected by a bear market because of relatively high dividend yields and low debt." The list includes, with yield percentages in parentheses: Chemical Financial Corp. (3.7), Commerce Group Inc. (3.3), Greif Brothers Corp. (2.7), Kelly Services Inc. (4.9), Lincoln Electric Inc. (2.7), Modine Manufacturing Co. (4.7)

Are you prepared for a possible bear market? "The best way to deal with the bear is to arrange things in advance so you don't have to rejiggle much after the bear hits," says Walter Updegrave, author of "Investing for the Financially Challenged." "Build a diversified portfolio so when stocks go down, other assets may keep rising. You may lament lost opportunities while stocks skyrocket, but a balanced approach - the right stock-bond mix - is what owning a portfolio is all about." WARNING: "Beware of day-trading abuses and risks," says David Nassar, Market Wise Securities.

Timing is everything. And retiring in a bear market - or even something just flirting with bear status - couldn't be worse timing. Baltimore's T. Rowe Price Associates crunched some numbers to figure the impact of a bear market on retirement, after the S&P 500 index fell nearly 18 percent between October and March. Bear markets - usually defined as a 20 percent decline in the market - are never happy times for investors. But hitting one in the first five years of retirement can spell serious trouble down the road.

DALLAS -- Are target-date mutual funds missing the bull's-eye? It appears the answer is yes for many of these funds, which are designed to smooth a worker's path to retirement by automatically resetting the investments as the investor ages. Typically, a target-date fund changes its asset allocation to become less risky as the investor nears retirement. But because there are crucial differences in the funds' asset allocation, some of the more aggressive have racked up big losses in the recent bear market and have drawn the attention of regulators and lawmakers.

NEW YORK -Stock prices sank yesterday to fresh bear-market lows on renewed worries about the country's banks and about General Motors Corp. The market opened lower and fell steadily throughout the day, with the Dow Jones industrial average sagging 281.40 points, or 4.1 percent to 6,594.44, falling below the nearly 12-year low it set Tuesday. Yesterday's decline marked the second time this week that the blue-chip barometer fell nearly 300 points. The Standard & Poor's 500 dropped 30.32 points, or 4.3 percent, to 682.55, its lowest level since September 1996.

NEW YORK - The Dow Jones industrial average plummeted 345 points yesterday on a confluence of poor news about the economy, although investors could not pin the drop on any overriding reason. Reports showed that retail sales were weak in August, just as more Americans filed for unemployment benefits. Anxiety lingered about a global slowdown. Fears of another financial crisis refused to go away. None of the news came as a shock to Wall Street. So what pushed the Standard & Poor's 500-stock index down 3 percent, its worst daily performance in three months?

It's official. We're in a bear market. Now what? If you have done all those boring things that financial planners nag about, like making sure you have a diversified portfolio, you should be in good shape to weather the downturn. You might even be in a position to snap up bargains in the stock market while prices remain low. But if all your money is tied up in a narrow selection of stocks, you may be in for one of those hard lessons that bear markets deliver. A bear market is generally defined as a 20 percent decline from the most recent market high.

Baby boomers are afraid of the bear market. Raised on Wall Street's buy-and-hold primer that's been spoon-fed to the first generation of 401(k) investors, many boomers gritted their teeth and stayed with the market through the 2000 to 2002 bear. Now, however, retirement is only 10 years away - or less - for many boomers, and they are wondering if it is foolish to stay the course. The stock market has recently touched bear market territory again - a drop of about 20 percent since October 2007.

Timing is everything. And retiring in a bear market - or even something just flirting with bear status - couldn't be worse timing. Baltimore's T. Rowe Price Associates crunched some numbers to figure the impact of a bear market on retirement, after the S&P 500 index fell nearly 18 percent between October and March. Bear markets - usually defined as a 20 percent decline in the market - are never happy times for investors. But hitting one in the first five years of retirement can spell serious trouble down the road.

Baby boomers are afraid of the bear market. Raised on Wall Street's buy-and-hold primer that's been spoon-fed to the first generation of 401(k) investors, many boomers gritted their teeth and stayed with the market through the 2000 to 2002 bear. Now, however, retirement is only 10 years away - or less - for many boomers, and they are wondering if it is foolish to stay the course. The stock market has recently touched bear market territory again - a drop of about 20 percent since October 2007.

WHAT are America's most popular stocks? From December's Money magazine, here are the most widely held stocks in America: American International Group Inc., AOL Time Warner Inc., AT&T Corp., Cisco Systems Inc., Citigroup Inc., Coca-Cola Co., Dell Computer Corp.' Walt Disney Co., EMC Corp. and ExxonMobil Corp. The "most widely held" list was created by comparing lists of top mutual fund holdings, investment club picks and companies with the largest number of shares outstanding. TURKEY HASH: "Total assets in 401(k)

When the stock market goes through a crisis in confidence, so do ordinary investors. It's hard to have much faith in a financial plan when all of the news is bad. The standard advice is "Hang on, for dear life," which is the hardest advice to follow at a time when your investment mettle is being tested. While trading in and out of funds is frequently a recipe for disaster, there are moves that investors can make to improve their confidence and portfolio without blowing up the long-term returns that they supposedly surrender by giving up on a fund.

It's the nightmare scenario for a person retiring, or just retired. A bear market - a harsh, lengthy downturn - devours savings just when a person needs to start using the stash. Analysts have been speculating that we could be in such a period, and financial planners have been going over portfolios to make sure clients can weather it. There is never an opportune time for a bear market, or what typically is defined as at least a 20 percent drop in stocks that continues for months or even years.