What Woke Up The Bear Market?

What Woke the Bear Market?
Recent stock market declines have pushed U.S. markets down nearly 20% from their highs this past spring. A 20% decline is commonly called a bear market, and as usual, this one emerged suddenly and without much warning. Since bear market declines happen regularly -- an average of every three to four years -- you'll undoubtedly experience many bear markets as a long-term investor. But each one can be unnerving, so it's important to review bear market survival strategies whenever one starts.
Bear markets frequently start because fears dominate fundamentals. Basically, what people think may happen overshadows what's actually happening. This time, the fears that pushed the stock market into bear territory aren't new, and they've largely been responsible for the volatile markets we've experienced since early August. The two major concerns are:

High government debts -- This is especially troublesome in eurozone countries. This week's decline was sparked by Greece's projection that it will miss deficit reduction targets required for additional bailout funds.

Slower economic growth -- Many people are worried that the U.S., Europe and emerging markets will stumble into recession, based on several months of mixed economic news.

Greece at the Center of European Debt Concerns
Greece's deteriorating situation has made headlines almost daily, scoring one for fear over fundamentals. Like sitting through a commercial break in your favorite TV program, markets have grown increasingly anxious for a resolution to the euro debt crisis. Unfortunately, there is no fast forward button. European policymakers are working on a plan, but they've been moving slowly. The markets move quickly and don't react well if they have to wait for decisions. This frustration creates volatility, and as we all know, the commercial breaks often seem to get longer. So in the interim, it may be awhile before the program returns.
Encouraging Manufacturing Data Went Unnoticed
The latest disappointment from Greece also threw a wet blanket on better-than-expected U.S. economic news, which showed manufacturing activity picked up in September. Notably, this number remained above the all-important 50 level, which indicated a slowly growing economy and not an outright recession.
While the economic indicators are likely to remain mixed, additional evidence suggesting the economy remains on a path of modest growth could help soothe recession fears and relieve pressure on stock prices.
Surviving Bear Markets
Although the start of a bear market can raise worries about what's to come, remember, market pullbacks, like commercial breaks, are normal and happen regularly. Bear markets are rarely as severe as the one we experienced in 2008, but surviving any bear market requires patience, discipline and controlling your emotions. In fact, you may be able to use the situation to your advantage by:

Looking for opportunities to add quality investments that have lower prices due to the recent sell-off

Working to ensure your portfolio is appropriately balanced and diversified to help better weather the volatility that is likely to continue in the near term

Consider what strategies may be appropriate for you.



From my friends at Edward Jones in Lake City Fl.