DJIA enters bear market territory with 20% drop from October 2007

Bear market's cause: sluggish U.S. economy

What's at the root of this bear market? Or, why is the Dow falling? Economist David H. Wang said "it doesn't take an economist to figure it out. The U.S. economy is not doing too well."

"The United States is experiencing its worst housing slump in a generation, gas prices are above $4 a gallon, food prices are rising, corporate profits are down, there's little or no job growth and people are concerned about more layoffs. These indicators point to tougher times ahead for the U.S. economy, and the market is reflecting that," Wang said. "Corporate earnings are also likely to be lower in Q2 and Q3 on a year-over-year basis, and as profits sink, so the Dow will sink, usually."

Economist Glen Langan concurred with Wang, and said statistics relating to typical consumers do not provide a great deal of confidence for Wall Street to push shares higher. "A lot of it comes back to declining disposable income. Middle America is being pressured by increasing costs for essential items all around them, particularly energy and food, and it's substantially lowered disposable incomes," Langan said. "Wall Street sees this, and knows earnings can not increase without a robust consumer base, so it's taken shares lower."

Further, Wang added that investors and traders should not be deluded into thinking a bear market is unjustified, because the U.S. is not in a recession, technically, but is still registering very low GDP growth. "Slow growth can cause enormous damage to the United States. The U.S. needs 2% or better GDP growth for a healthy economy," Wang said. "With slow growth, unemployment continues to rise, mortgage bankruptcies will rise, and so will the federal budget deficit. A slow growth economy can easily lead to a bear market, which is what we are witnessing today."