The bear got mighty heavy during the second three months of 2002.

And the weight of a falling market, or what Wall Street calls a bear market, probably won’t lessen anytime soon.

Here’s how bad it got:

In the quarter ending June 30, the Dow Jones Industrial Average dropped 11.2 percent. The Nasdaq tumbled 20.7 percent. U.S. stock-based mutual funds declined 12.6 percent, their sixth worst quarterly showing since 1977.

And investment professionals are saying stock market investors should brace to keep carrying the bear on their backs for at least another six months.

“I feel strongly that the market will get better, but it is not a question of a day or two,” said Garth Terlizzi of Lawrence’s LPL Financial Services.

So how many days will it be?

“I don’t even think we are close” to a turnaround, said Paul Desmond, president of Lowry’s Research Reports in Palm Beach, Fla.

Most brokers can only say it will be sometime in 2003 before the market bounces back and begins consistently posting gains.

“We are definitely very bearish for the near term,” said Margaret Stenseng, district manager for the Lawrence office of Waddell & Reed. “Our home office economists are indicating that we’re not really going to see anything positive for the rest of this year. What we are looking for is modest growth and recovery in 2003.”

Plenty of problems

Finding the causes of the decline is not difficult. They range from Sept. 11 terror to the recent frightening news about corporate accounting. That has left investors wondering whether they can trust the financial reports generated by public companies.

“We’ve had a lot of excessive greed from corporate executives and we’ve had a lot of scandals, and of course the Sept. 11 tragedy is still weighing on us,” said Jerry Samp, with the Lawrence office of A.G. Edwards & Sons.

“But the thing about the stock market is it always goes to extremes and we’re in one now. We’re in an extreme marked by fear and greed.”

But Samp and others point out there is good news in the economy. Interest rates are at 40-year lows, job numbers are growing and inflation is in check.

“But we’re in a period when investors are not looking at the economics of what is happening in the overall economy,” Samp said. “Personally, I don’t blame them. They’re focused on when the next revelation of someone cooking the books is going to come along.”

Terlizzi said investors may be turning too much of a blind eye to the good news.

“We have some things happening in the economy that should bode well for the market,” Terlizzi said. “But we’ve gone from what (Federal Reserve chairman Alan) Greenspan called irrational exuberance a couple of years ago to the other extreme, which is irrational pessimism.”

Hang in there

Not surprisingly, brokers are urging their clients to remain invested in the stock market.

“I think people who are in the market for the long haul will look back at this decade, from 2000 to 2010, and say it was the best buying opportunity they ever had,” Terlizzi said.

Stenseng tells her clients to not make knee-jerk reactions.

“If you didn’t have a plan, then that was your mistake,” Stenseng said. “When you rely on your plan and realize that its goals are measured in decades, not months, then you’re still fine. I tell people down markets from time to time actually help us because it allows us to buy some stocks cheaply.”

Not everyone is convinced by that line of thinking. Some economists clearly are wondering whether the market has had a fundamental change.

Jim Paulsen, economist and chief investment officer of Wells Capital Management, told Barron’s magazine recently he was worried the market may be set to see a multi-year period of dismal returns.

He theorized that during the past decade, earnings growth of companies has been fueled more by consolidation and the cost savings that comes with it rather than strong sales growth. He’s concerned that in the future companies won’t be able to find new ways to cut costs, so profits will stagnate.

“It dawned on me that just maybe the buy-and-hold mantra of today’s generation of stock-market investors might at long last be destined for the ash can of history and that a solid stock-market recovery might not be just around the corner,” Paulsen told Barron’s. “In fact, the rules of the game seem to be changing in ways likely to shatter the expectations of millions of investors.”

Samp doesn’t buy it.

“People ask me all the time if I believe Armageddon is coming,” Samp said. “I tell them that I’ll believe that if they can convince me we don’t live in the greatest country in the world and that something will happen that will make our economy less than the strongest in the world. I’m pretty confident we’ll put this behind us.”

Issues of trust

Whether the average investor will be so optimistic remains to be seen. Enron Corp., WorldCom Inc. and Xerox Corp. have created many questions for those who have money in the market.

The biggest question is whether they can believe a company’s stated earnings.

All three Lawrence investment professionals interviewed said they thought investors could trust most companies. But the key word may be “most.”

“I really do believe that the majority of companies are believable, but the problem is none of us have a crystal ball to know which ones are and which ones aren’t,” Samp said.

We should know soon, though. After WorldCom, almost all companies are going through their books to make sure they are problem-free. If other companies have similar problems, they’ll likely come to light in the next couple of months, Stenseng said.

“In a weird way, I think this all has been a good thing because there will be so much self-scrutiny,” Stenseng said. “After this process is over, investors should feel much more confident about what they’re investing in.”

 The Associated Press contributed to this story.