As long as I see that scenario continuing, I believe equity markets will continue to rise over the long-term. On the other hand, if core inflation rises to say 0.5 pct (or higher) more than the rate of productivity growth, then I believe a secular bear market would begin. (As an aside, I'll get into a discussion of productivity in a future article.)

Shorter-term, as the Fed continues to carry out its policies that are designed to ensure the sustainability of stable long-term economic growth, there are (and will be) significant bearish price cycles in the equity market. I think we are experiencing one of those presently.The bottom line to any discussion of the terms bull and bear is what it means to you, and your wealth.

As I see it, a securities bull cycle (generally rising prices) is one where I ought to be trying to increase my portfolio wealth, and a bear cycle (generally falling prices) is one where I ought to be mostly concerned about protecting the wealth I have already accumulated.

So, to me, the terms bull and bear represent nothing more than the strategies and tactics that are appropriate for the times, for planning for tomorrow.

This morning I received the following mail, which was published as a reader comment to one of yesterday's blog articles:

"Bill, You mention that a further 10% correction in US equities might set the stage for a new bull market in stocks. I think in your last weekly review you anticipated this bull run could take the Dow to new highs in 12,000 range. I know we are purely guessing here, but based on all of your other assumptions, I would expect the opposite. Higher interest rates and slowing economic growth should 1) compress P-E multiples and 2) slow earnings growth. Or are you expecting the higher inflation to artificially increase earnings? I just don't see why the bursting of the real estate bubble and a substantial rise in long-term interest rates potentially sets the stage for a new bull market in US equities. Thanks, B"

It's a good question on this day of the FOMC meeting, so I answered it as follows:

"At some point, the savings account rates at banks and the coupon of a bond will be high enough that Americans will start putting their disposable income and accumulated assets into those savings and investment instruments. And if the equity price level (Dow, Nasdaq) (which is the result of price times earnings) is lowered somewhat, then Americans will start seeing the attractiveness of those securities as well.

At that point I'll permit myself the luxury of listening to pollyannas like Larry Kudlow. But for now the name of the game (for me) is to protect wealth, and to avoid market risk."

No one wants to live in an unreal world where earnings are imaginary, and where values dissipate. Just ask the people who lived in Latin American countries in the 1970s (who endured inflation rates of 1000+ pct annually) if they were improving their lifestyle, or just working for nothing.

Yes, in those countries during those years, prices were rising 1 pct per day, every day, and the reported corporate and personal earnings compounded to huge numbers, but real wealth was not being created. It was being destroyed, and equity prices reflected the reality, not the perception.

For the future, given that inflation is controlled in the U.S. and around the world, and that productivity is growing relatively faster, I truly believe that new investment opportunities presented by the digital age are compelling ones, and I'll be taking a more bullish stance to equity trading.

I'd call myself more of a pragmatist than an optimist by nature, but I am optimistic for the future.

Prices today and in the past are history. So I never lose sight of the fact that traders are investing for the future.

It's all about tomorrow. Yes, I believe we are still in a bull market.