Three years ago, March 10, 2000, the high-tech laden Nasdaq stock market in the United States touched a record high of over 5,000. Today, the Nasdaq is down by 74 percent to little more than 1,250. Markets are also down sharply in Europe and the economic outlook is clouded by rising oil prices and the prospect of military conflict in the Middle East.
It's been one of the most brutal bear markets on record. Only during the Great Depression of the 1930s did U.S. stock markets decline for three consecutive years. The downtrend has also hit Europe where the German and British stock markets are at seven-year lows.
Stock markets are viewed as barometers providing early warnings of future trends in economic activity. If that is so, are the markets telling us that a new recession is around the corner?
"The biggest thing about the global economy is that right now you're looking at a global economy with a big question mark over it," said John Cape, an economic forecaster in Houston, Texas. "Until the question of a war with Iraq is resolved, things can go one way or another way. I'm not sure what is going to happen. Personally I'm a little bit pessimistic."
War, if it comes, says Mr. Cape, could last longer and have more negative consequences than is generally expected.
In the Midwest state of Michigan economist Robert Tansky says the sharp losses investors have suffered over the past three years have taken a heavy toll.
"It certainly has affected their confidence. And especially it has impacted their retirement plans," he said. "Some of the people have said basically they'll never be able to retire because of the losses in their 401k plans." Mr. Tansky, a business consultant near Port Huron, Michigan, is not optimistic that the stock market will turn around anytime soon.
"I'm a little on the negative side," he said. "When I look at the PE [price to earnings] ratio for the blue chip [quality] stocks on the New York Stock Exchange, they're still fairly high on that PE ratio."
War in the Middle East weights heavily on the markets, as do oil prices, which are currently approaching $40 per barrel, their highest level in 12 years.
