Is This — Dare We Say It — A Bear Market?

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Warren Buffet once said that investors attempt to be fearful when others are greedy and attempt to be greedy only when others are fearful. Well, right now fear rules the land with an iron fist, as legions of investors once again ran for cover on a day the stock market lost 520 points.

Sure, there are reasons for the decline: The European debt picture is darkening and the housing sales report for the second quarter of 2011 was disappointing. But a less specific brand of fear can increasingly be detected among Wall Street insiders, who seem to be dusting off a term that economists, investors, consumers, and especially Washington politicians were hoping the markets would avoid: bear market.

(MORE: Can China Help Prevent a U.S. Tailspin?)

By definition, a bear market is one in which stocks have fallen 20% or more over at least a two-month timetable. Some traders stretch that period out to six months or even a year, but you get the picture. At around 1,120 at the end of Wednesday’s trading, the S&P index is technically in bear territory. And at 10,720, the DJIA is drawing close.

Although we saw bear markets in both 2008 and 2009, analysts continue to speak of them with an almost that-which-must-not-be-named awe. But speak of them they did today:

  •  “Many global equity markets have now entered bear market territory, having fallen by over 20 percent from their recent peaks,” Lee Hardman, an analyst at The Bank of Tokyo-Mitsubishi UFJ, told the Associated Press today.
  • Marc Faber, the editor and publisher of The Gloom Boom & Doom Report, told CNBC on Tuesday that the bear blowout is just getting rolling.
  • Viktor Shvets, director of research and equity at Samsung Securities Asia, earned himself the wet-blanket-of-the-day award when he told CNBC that the U.S. stock market will be in bear mode for 5 to 10 years. (In the silver lining department, he did add that “periods of significant bear market rallies” were likely during that period.)

Not all the data backs up these statements. According to the influential Investors Intelligence Survey, there were actually more bulls than bears active in the market early this week.

(MORE: What Europe’s Downfall Means for the Rest of the World)

Even so, Wall Street analysts and stock pickers are recommending that individual investors seek out solid, high-yielding stocks that make money in all kinds of economic climates. Consumer cyclicals, bargain retailers, and utility companies usually top that list. Others, like Faber, recommend gold.

So it would seem the bear is emerging from its den. The question is whether it’s here to stay.

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