Wall StreetDon't panic. That's the first thing to keep in mind as the headlines shout that the global economic risk from Japan's nuclear crisis is rising.

Understandably, investors are running scared. The violent force of the earthquake and tsunami that devastated parts of Japan and raised the specter of a nuclear crisis could easily spell more trouble down the road for the global economy. Indeed, warnings now abound of a more turbulent and depressed market ahead.

The decline in global equity prices that started on Feb. 18 and got "exacerbated on March 15 by the fear of a worst-case scenario unfolding in Japanese nuclear power plants still needs to play itself out, and will have further to run," cautions Sam Stovall, chief investment strategist at Standard & Poor's.

That makes sense. But let's not forget: When there's gloom and doom in the air, there's also opportunity -- a rare chance to jump on stocks whose prices have been quickly pulled down due to panic among jittery traders. In spite of the market's current sharp decline, nothing fundamental suggests the end for equities has begun, as some commentators are now starting to proclaim.

Crisis Will Keep Fed on Accommodative Course

When the market rebounds -- and it definitely will -- it will be with a forceful kick that should equal the market's snap back after 9/11, and could conceivably catapult the Dow Jones industrial average back to the all-time high of 14,164.53 it hit on Oct. 9, 2007. The Dow closed on Wednesday at 11,613.30, down 242.12 or 2.04%.

In the meantime, investors should keep cool and calm. Look at the situation this way: The U.S. economic recovery is in full stride, and this shock to the Japanese economy can only result in more encouragement for the Fed Chief Ben Bernanke to make sure the U.S. economic recovery doesn't stall, which will mean continuing the Fed's policy of accommodation and loose money.

"S&P's Equity Strategy thinks the U.S. Federal Reserve Board will conclude that low short-term interest rates will help combat the global uncertainty," says S&P's Stovall. What's more, he adds, the Fed's recent statements on the state of the economy "may even increase speculation of a third round of quantitative easing, which would likely aid commodity and equity prices."

Splashy events such as the crisis in Japan or the turmoil in the Middle East invariably distract investors away from the gains the economy has achieved in the past year and a half. In times of geopolitical conflicts abroad and acute emergencies, technical analysts who follow the charts reigning supreme in assessing what's really happening to the equity and bond markets. But investors should pay more attention to the improving market fundamentals: Corporate earnings continue to be strong and the rebounding economy is gaining strength.

Technical analysts, who are skilled at assessing what may lie ahead based on past market trends and patterns, tend to fuel even more of what's already happening. When the market is in full decline, as it is these days, they tend to become more bearish and warn of how much lower it could go. The same thing happens when the market is on the upswing: They tend to calculate how much more upside there is. That's why wise investors should combine both fundamental and technical analysis in probing the market's motions.

An Oversold Scenario Developing


The first thing investors should do when the rest of the investing world is losing its clarity amid utter confusion is to draw up a list of the specific stocks they'd want to buy at bargain prices. Jump in as the Dow or S&P 500 head south. But make sure you have studied the fundamentals of those companies and the technical behavoirs of their stocks before pulling the buy trigger.

Right now, we know the market could still go lower, and that's when more opportunities should be seized by investors. Hopefully, they've already taken profits from the stocks that advanced during the bull market. Proceeds from those sales can fund their purchase of those now under-priced stocks.

Alec Young, analyst at Standard & Poor's international equity strategist, believes an "oversold" scenario may be developing in the international markets -- and the Japanese market in particular -- which could be exploited by short-term traders looking to take advantage of the falling prices.

In the U.S. equity market, "we recommend sticking with more cyclical sectors, as a recovery from this pullback would likely benefit those stocks and groups that were hit the hardest," says S&P's Stovall.

This Too Shall Pass


Investors should not lose track of what's important: the resilience of the U.S. economy. When investors refocus on this and away from what's happening in Japan and the Middle East, the shares of companies involved in the recovery, like those cyclical stocks, will be the market's front-runners once again.

Even before the massive disaster engulfed Japan, the markets were already showing signs of wariness and weariness. Not a few market analysts had been predicting a significant market downturn after a year of massive gains for equities. Obviously, the triple calamities of earthquake, tsunami and nuclear crisis in Japan were not being factored into any analyst's equations.

What should be in the equation as we look at markets now is that this, too, shall pass. Investors with the stomach for the ride should play the coming market rebound.

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Dereck

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May 29 2011 at 12:35 AM Report abuse rate up rate down Reply
kamdajani

who will invest while japan radiation falls on usa?cooked media.

March 18 2011 at 9:08 AM Report abuse -1 rate up rate down Reply
kamdajani

crab no economic boom after japan radiation falls on california who will come here to inhale radiation?

March 18 2011 at 9:02 AM Report abuse -1 rate up rate down Reply
cartra

DONT WORRY EVERYTHING YOU SEE IS NOT REAL, IT IS JUST A TEST,KEEP INVESTING YOUR MONEY AND EVERYTHING WILL BE FINE. TRUST US WE ARE THE GOVERNMENT!!

March 17 2011 at 11:16 PM Report abuse +3 rate up rate down Reply
beyelbay

Ya, well I think a full blown major corretion is what lies ahead. So, I'm gonna sell and cut my losess short and get back in after the dow goes back to 10,500 or so. Except for my Gold Fund.

March 17 2011 at 9:49 PM Report abuse -2 rate up rate down Reply
beyelbay

Seriously, Where can you invest your 401k in this crazy economic climate? Unfortunately I was fully invested. Normally I will never sell into a correction, but this one is way to scary. Sold my Technology funds for inflation protected bonds. Japan is the 3rd largest economy in the world. We have no idea of what is going to happen with their nuclear crisis? What happens if they experience a full scale meltdown? There exist the possability that they could lose a great deal of their land mass forever? Radiation spreading to Korea etc. and other places. They are dumping the dollar to get yen to rebuild their country. They will not buy Treasuries for a long time to come. We are printing into oblivian. Inflation is eating up the little savings we have. The cost for gas and food is already spiralling out of control. It will get much, much worse!The only thing proping up the stock market is the printed noney given to the banksters. QE2 ends in june. Whats next QE3,4? We reach the point of unsustainability in April (that's only 1 month away) with the federal deficit. China will probably no longer buy our debt soon? Bernanke says we can buy are own debt? How does that work? The world will probably quit using the dollar to price oil soon. So they will no longer need it.So what happens to it when it gets dumped on a massive scale? The only investments I have made money in are Gold Company and Natural resource Funds. Wish I could buy real gold. Also took a beating on Oil Company and oil equipment funds as of late. Holding on to those in desperate hope. Bond market is way to risky cuz interest rates will eventually have no room to go but only up and money markets pay zero. Do you really think the market is ever going to return to pre 2008? I believe the chances of it going down (even a lot) are much greater. Can't take the risk any longer in anything except for real assets. Even those are risky because they are owned buy companies on the stock exchange.

March 17 2011 at 9:24 PM Report abuse +1 rate up rate down Reply
1 reply to beyelbay's comment
kitharris1

so what you;re saying is i should buy. buy stocks now and beat the rush. dow 14,000 by dec. 2012.

March 18 2011 at 10:55 AM Report abuse +1 rate up rate down Reply
jwrey1924

What is happening to Amazon?????

March 17 2011 at 4:52 PM Report abuse rate up rate down Reply
jwrey1924

Question Wht6s

March 17 2011 at 4:51 PM Report abuse rate up rate down Reply
ajgorm

The only people making money here are the brokers and elite. Japan is melting down the number three economy and radiation is everywhere and will shut down everything given time. Our governments are flooding money into the economy to offset fear and it will sink us in the end.

March 17 2011 at 4:12 PM Report abuse +3 rate up rate down Reply
bravo8222

Today nothing has happened that was different from yesterday and look at the market! Get out as soon as you can the bottom is about to fall!!!!!!!!!!!!!

March 17 2011 at 2:00 PM Report abuse +2 rate up rate down Reply