This is the question asked by children on a long journey. It is also the question that many investors are currently asking about stock markets. On October 10, we saw the S&P 500 index hit the lowest point since early 2000. At the time of writing, the S&P index had increased by 12.5% and Nortel shares more than tripled in price, from 67 cents in October. Many other stocks have gained in price over the same period.

Over the long term, the stock market is driven by the health of the economy, but psychology plays an important role over the shorter term. At the height of what is now known as the technology bubble, we witnessed unbridled enthusiasm. Companies with an interesting idea, a .com at the end of their name and no profitability, were sold for millions of dollars with the assurance that "things were different this time" Profitability, revenues and good management were "old economy" ideas, out of tune with this new era. We have now come full circle.

Two and a half years of a bear market have changed investors' psychology dramatically. What we witnessed this summer was irrational cynicism. This is the mirror image of the euphoria we witnessed during early 2000. This pessimism drove the stock market to the edges of despair. The prevailing mood expected worse news every day.

Many are asking, "Is this finally the bottom?" The answer is, no one knows for sure. Canada continues to be the strongest economy of the G7 group of developed nations. Canadian and US interest rates are at near 40 year lows, making it easier for North Americans to purchase homes and cars or start businesses, all strong drivers of the economy.

That said, the stock market and stock based mutual funds are no place for money needed to pay the mortgage or buy the groceries. As long as your time horizon is long-term and risk issues have been properly analysed, the stock market may now be the best investment opportunity for some time to come. Of course there is no guarantee with stocks, and prices may once again test the lows of October. What we are now seeing, however, makes a persuasive case for a slow and steady recovery in world stock markets.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.