The best thing about 2008 is that it's over, a tough year for markets and economies worldwide. Paying attention to the stock market, equities, and our portfolios was as much fun as watching a cancer patient on chemotherapy. The majority of "experts" and pundits did not predict the downturn, and were caught off-guard by its severity and rapid decline.

But with the benefit of hindsight we now know for sure:

- This is a recession, which started in December 2007, and is now entering its 14th month. Our thanks to the U.S. Bureau of Economic Research for their December 1, 2008 report notifying us of this fact. We are looking forward to their next report stating the recession is over, a year after the fact.
- The stock market "correction" of August 2007 was not a correction but the start of a new bear market, preceding the recession by 4 months.

The U.S. stock market established a bottom on October 10, 2008 with the Dow at 7,900, and in a typical bear market move re-tested it a month later at 7,500. I expect future rallies to be short lived, and the lows re-tested a few times before the next secular bull market, which should be sometimes around Fall of this year.

Where are we headed now?

The longest recession on record was 43 months, following the 1929 stock market crash. The same "experts" who were wondering whether this was a recession, are now debating if this one will be like the Great Depression, Japan's self inflicted 18 years downturn, or a 1973-1974 style recession with a recovery late this year. I am betting on the latter.

The several $ trillions injected in the form of fiscal stimulus, financial and auto industry bailouts, near zero interest rates, and upcoming new infrastructure investments will find their way into the economy and start a new cycle, eventually. 2009 will be a year of transition on the way to recovery, with the next economic cycle driven by a back-to-basics focus on infrastructure, alternative energy technologies, and corporate capital investments as opposed to consumer spending.

The American consumer is bruised but not dead, and will shop again. Lower interest rates and fuel prices will provide more discretionary income, which will go toward debt reduction and slowly restore houselhold financial health. Jobs will drive consumption as opposed to the other way around.