8-15-11 leadoff, front-page WSJ article: As stock markets prepare to open after period of volatility, there is concern about health of world economy.

From an August 15, 2011 front-page article in The Wall Street Journal:

Some analysts are comparing the current market situation to the long-running market troubles of the 1930s and 1970s, when it took well over a decade for world economies and markets to recover and return to normal. Not everyone shares this view, but these skeptical analysts are warning clients to be prepared for more market trouble.

Skeptics say that market behavior in the 2000s is looking similar in some ways to what investors faced in the 1970s, when inflation stifled stock growth for more than a decade, and in the 1930s, when an economic depression led to long-running market trouble.

The current period of stock weakness began in 2000 with the bursting of the technology-stock bubble, they say, and continued with the popping of the real-estate and mortgage bubbles in 2006 and 2007.

Just like today, markets in the 1930s and 1970s were paying the price for the market bubbles and financial speculation that had come during boom times, and also were dealing with troubled world economies. It took years in each case to restore economic fundamentals and investor confidence.

In periods such as the one that began in 2000, says Mr. Hayes of Ned Davis Research, "confidence never really comes back because of all the lingering worries. At the first signs of a double dip or some kind of recession, it gets the market moving in a negative way."

Ultimately, those bearish eras end and strong market performance returns. Stocks returned to sustained gains from 1942 to 1966 and from 1982 to 2000.

Not all analysts agree with this kind of historical analysis. Some think stock movements are random events driven by economic events that can't be predicted.

But those who endorse this way of looking at historic events call these longer-term periods of strength and weakness "secular" bull and bear markets. That distinguishes them from shorter-term "cyclical" bull and bear markets.

Cyclical bull and bear markets are simply moves of 20% or more, up or down. A secular bull or bear market includes several of these individual bull and bear markets, making these secular trends last roughly 12 to 18 years.

A secular bear market looks like a long sideways period. Stocks move violently up and down. Cyclical bull markets occur in this environment, but they tend to be weak.

They can be followed by long, strong bear markets such as the one from 2007-09, which wipe out all or much of the previous bull market's gains. In this kind of long-term period, investor hopes are repeatedly raised and dashed.

Eventually, a secular bear market will give way to a period of sustained strength. But with debt and economic-growth problems afflicting both the U.S. and Europe, few economists expect the current market troubles to resolve themselves easily.