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Published: Tuesday, 10/12/2004

Investors are thankful for bull market, such as it is

The best way to look at a bull or bear may be through a rear-view mirror: The beasts don't always behave the way they're supposed to.

The bull market on Wall Street just turned two years old, but there are some signs it may be turning bearish again - especially if oil prices continue to set records and if spending by businesses and consumers slows down.

But, in any case, the mood seems much cheerier now than it was in that awful week in October, 2002, when the Dow Jones industrial average fell by triple digits in three of four trading sessions.

That time it took only weeks for the Dow and the other two major indexes - the Standard & Poor's 500-stock average and the Nasdaq composite average - to rise 20 percent from their lows and qualify as another bull market.

However, it's hard to be too cheerful about a "bull market" that still leaves the Dow 14 percent off its all-time high, the S&P 500 down 26 percent from its peak, and the Nasdaq down 62 percent from its historic high.

Actually, bull and bear markets can be judged only in retrospective - after subsequent results establish exactly when the highs and lows occurred. At any given moment, we could be in a bear market and simply not know it yet, or the bull could run for a long time and jump to new historic highs.

The greatest bull market had a remarkable run, from August, 1982, to early 2000 -a period in which the Dow went from 776.92 to 11,722.98. The Dow's gain of 1,400 percent was almost matched by the S&P 500, which topped out at 1,527.46. And the Nasdaq ballooned 3,000 percent to peak at 5,048.62.

That achievement seems like ancient history nowadays - especially since investors suffered through three straight down years on Wall Street. And, despite having a tremendous year in 2003, investors are once again worried about the market.

We didn't know it at the time, now nearly five years ago, but that bull market ended between January and March, 2000. We knew it for sure after the Sept. 11, 2001, terrorism.

The market indexes plunged three times - the week after the terrorist acts, the next July, and again in October, 2002 - and each low point was lower than the previous one.

When the latest bull market began, investors were understandably bruised and sorely lacking in confidence.

But the market did improve remarkably in the months after the lows - the Dow gained 47 percent, the S&P 500 rose 49 percent, and Nasdaq soared 93 percent (albeit from a very low level).

But with the typical bull market lasting between two and four years, this one could be getting old already.

For sure, the market still faces many problems - including the high price of oil, fears of higher interest rates and inflation, the growing federal budget deficits, and, of course, the election jitters.

So, why is investors' mood much better than it was two years ago?

Perhaps it's because they are counting their blessings. The war in Iraq, as bad as it turned out, was still not as bad as many had feared. Perhaps it's because the terrorist attacks of 2001, although not a dim memory, are moving further into the past.

But perhaps most of all, Americans have come to realize that life does, indeed, go on.



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