Also, in August 1982 investors were waiting for signs that the harsh monetary medicine prescribed by former Fed Chairman Paul Volcker had finally broken the nation's inflationary fever. When that evidence arrived in the form of slower money-supply growth, the stage was set for a lengthy decline in interest rates. Eighteen years later, long-term bond yields are still falling. Those relatively painless experiences probably inured some investors to the unpleasant reality of bear markets. Throughout the decline there is a sense of feeling blindly for a bottom that is always just out of reach.
Intermittent rallies feed on hope that the end is at hand, only to stall and yield to more selling.
By the end, sentiment has turned from cautious optimism to abject despair, and many investors have sworn off the equity asset class for good. Only then do stocks begin to rise from the ashes. Appeared in the Milwaukee Journal Sentinel on Jan. 6, 2001. All rights reserved. Produced by Journal Interactive .