Despite Friday's Rebound, Stocks Still in Bear Market

The Grumpy Investor

With all the uncertainty floating through the market, there has been little else for investors coming back to the market after summer vacation to do but sell.

Even seemingly good news, like the report Thursday that productivity rose more than expected, brought a black cloud to Wall Street.

"That was a positive read on productivity. It tells you that workers are working efficiently," Krosby says. "Yet when you're in a bad mood, when you're in a negative mood, it also means that companies don't have to hire people."

Forget that the economy is producing more efficiently, the Wall Street translation is more reason for the employment picture not to get better.

"In a market that wants to do down, it's going to take any good news and turn it into bad news," Krosby adds. "This was a market poised to go down. It's still a bear market, and this was a reminder that you're in a bear market."

So Now What Happens?

For many investors it's merely a waiting game until valuations hit the point where the buyers kick out the sellers and the market turns around.

How much time? More uncertainty.

"We will go lower until we find that valuation point where you have value investors come in and start picking through the pieces," Miralles says. "There is some good news, and the good news is that in this decade corporate earnings are up strong, dividends are up strong, and in spite of everything else these are market positives and the market will eventually find a bottom."

Miralles is among those who remain optimistic as they remind themselves that the long-term prognosis is positive. In the nearer term, he points out that September is historically the market's worst month and October is likely to get better.

He particularly likes small-cap stocks, which can recover more quickly than market bellwethers because of their size, and thinks domestic companies will fare better than multinationals.

Others in the same mindset see the sinking stocks as an opportunity.

"Adjusted for inflation this is the worst market in 110 years," Jim O'Shaughnessy, of O'Shaughnessy Asset Management, said on CNBC. "So things can only get better from our perspective because the world is not going to end tomorrow."

Fritz Meyer, of Invesco, also said on CNBC that he likes consumer discretionary stocks, explaining the current strategy as "investing in stocks when the news flow is the worst."

O'Shaughnessy and Meyer discuss their buying-the- bear strategy in the accompanying video.

For Miralles, the current state of the market is like a forest fire clearing the land for development ahead.

"There's probably some really great opportunities over the next three to five years," he says. "Five years down the road I think we'll be looking at this as a clearing out phase."