In the 110 years since 1899, the Dow (the Dow Jones Industrial Average or DJIA) has had 29 bear markets, including the one that began in October, 2007, and 28 bull markets, including the long last one, from October, 2002 through early October, 2007. On average, the bears each lost 31% and lasted 17 months. And the bulls, also on average, added 92% each and lasted 30 months. Between the two parts of the cycle, we flip between bear and bull or vice versa about once per two years.
Unless we think the end of the world is at hand, even taking into account the worst that overpaid executives, sub-prime mortgage lenders, derivatives traders, and politicians can do, sooner or later this current voracious bear will also be followed by a roaring bull.
Since 1899, there has been only one U.S. bear market as severe as or worse than the current one, and that was from September 1929 to July of 1932. The Dow lost 90% in 34 months, but that dismal period was followed by a rise of 175% over the following 20 months!
If one looks at prior bears that were severe (off 38% or more but not necessarily as bad as this one or the Great Depression), the prospects are more promising. Including the current one, there have been 11 such mighty bears since 1899. They have had average losses of 48% (right where we are in the present downturn) in 21 months.
The 10 bull markets that followed each of those bears except the present one had average increases in the Dow of 94% over a 34 month period, enough to offset the average losses. Even within both bear and bull markets there are rallies and dips. So, by employing a strategy of selling some of one's assets when the markets rise steeply, placing the proceeds in secure short-term bonds, Certificates of Deposit, or the like, and then buying more assets after the markets have fallen steeply, one may take advantage of the fluctuations J. P. Morgan mentioned and increase one's odds of coming out of even terribly severe market shakeouts as a long-term winner.