Since 1929, the Dow has fallen an average of 30% during bear markets, Desmond said. The current decline, he said, could be worse than average.
"I've been at this close to 45 years, and I don't remember too many of those bear markets having as many background problems as this one has," Desmond said. "The likelihood of this decline being an average decline is highly unlikely. It's going to be deeper than that."
The current sell-off has erased the belief that the market hit bottom after the startling eleventh-hour rescue of collapsing investment bank Bear Stearns Cos. in March.
When the sub-prime mortgage crisis morphed into a broad credit crunch last summer, some market watchers said conditions wouldn't improve until a major Wall Street firm failed. At the time, that seemed unlikely. But when Bear Stearns was forced into the arms of rival JPMorgan Chase & Co. in a Fed-engineered salvage operation, there was relief on Wall Street that the central bank had prevented a systemic panic.
"Investors may have jumped too quickly and thought, 'Here's Bear Stearns. We've dealt with that and now it's over,' " Dudack said.
The market failed to realize, she said, that the economy's weakness is "going to be a long and drawn-out affair."
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walter.hamilton@latimes.com
