That was a foul day for the market yesterday with all sorts reasons cited as to why but I don’t think I heard the reason that makes the most sense to me which was there was no reason.

Sure the Goldman comments, oil, the dollar, some earnings news and the like were negatives and obviously contributed but I think the story is simpler than that.

I have been saying the same thing for ages; this is a bear market (a normal one in my opinion) and bear markets go down a lot over long-ish periods of time.

Often the fundamental catalysts for bear markets have similarities but the market action is very similar time after time.

So far in this bear there have been a couple of nice feel good rallies which have so far ended up getting unwound. While there has been denial on the part of some market participants about the bear there has also been a real fear of how different this go around is. Both sentiments contribute to my opinion that this will be normal.

One recurring comment I have made for many months is how text book this bear market is turning out to be. While big declines often trigger an emotional response I would think people prone to emotion might find solace in the text book nature of the decline.

For ages I wrote about thinking ahead of time about what a bear market would look like and what it might do to a diversified portfolio. The idea was that by thinking about and realizing that that at some point the market will endure a bear market again and when that happens stocks will go down and doing so at a time when markets are doing well allows for an emotionless plan of what to do or at the very least lessen the emotional response.

I try to do this with clients and I think it has helped. I also wrote about planning an exit strategy ahead of time and then sticking to it when things hit the fan. If you’ve done this then you have probably avoided some pain and prone to fewer panic sells.

If you did not do any of this on the current go around you will get the chance in the next bear market. The reason why I wrote about this topic some many times over the life of this blog is for periods like right now. Market cycles are inevitable, planning ahead of time for defensive action is easy to do and does not require being right about about too many things.

I said ahead of time that the market warns investors when demand becomes unhealthy. If demand is unhealthy then it makes sense to expect that to be bad for equity prices. This process probably read as being very simplistic when I first wrote about it (here is one link from 2004 on the subject) but you can decide for yourself the effectiveness. I would add that while I do this quite faithfully in my practice I didn’t come up with any of it, the point being that anyone can do it.

I guess the take here should be keep it simple, do what you have to to remove emotion (so plan ahead) and be disciplined.

Last 5 posts by Roger Nusbaum

• The Best First Day Ever? - March 19th, 2010
• Thursday Tidbits--Special March Madness Edition - March 18th, 2010
• Live Stream of Retirement Panel at 2pm EDT (If it works) - March 17th, 2010
• Conversation We Cannot Hear - March 17th, 2010
• Retirement Investing: What To Do in a Near Zero-Rate Environment? - March 16th, 2010