US stocks are in a bear market which started from the last highs in October 2007.
The 'correction' became a bear market when the declines originally surpassed twenty percent in March. It does not matter that a few of the broader markets did not confirm. Once two of the major markets crossed that was it.
Since then we have had a corrective bounce which retraced approximately half the decline, and then turned sharply lower once again. Notice how all the index moves are starting to become more 'synchronized' although the broader markets are still lagging.
It would be classic bear market action to see this leg decline down to the thirty percent level, with perhaps a little bounce back up.
The US is also in an economic recession, despite the games being played by the Bureau of Labor Statistics with the GDP and inflation numbers. All the classic signs and co-indicators are there. Slapping paint on a falling building does not make it stronger or keep it from collapse.
The financial sector is in disarray. The investment banks have turned into predators in the speculative markets, and are engaging in little productive activity or efficient capital allocation. What we are seeing is the final transfers of wealth from the many to the few as the Republicans exit the Beltway.
We are also seeing a 'changing of the guard' from the leadership of the Cold War generation to Aquarian Agers and Generation X. A shift in attitude will be noticeable especially as the last of the Depression - World War generation fade away. They bore heavy burdens, they accomplished many great things, and had many flaws as a result of their harsh environment, but they also are of the past, and their time is done, and new challenges lay ahead. The US presidential election could not be more representative of this change.
It will not be easy, as for example the change of this type that occurred with the demise of the Victorian era and ushering in of the twentieth century.
As such this is more than a bear market, but one of those generational cyclic changes that are quite painful and sometimes violent, but which often lead to a more sustainable equilibrium.
Certainly there will be new schools of economic thought to supplant those which have gone before, but all of which are echos of the past.
Who was it that said we look and move forward 'standing on the shoulders of giants?' Isaac Newton in the 17th century comes to mind, but before that Bernarnd of Chartres in the 12th century, and before that the Greeks in the myth of the blind giant Orion carrying Cedalion. So it is that we have a debt of gratitude and preservation to the past, but a obligation of achievement and advancement to the future.
