Talk Is Cheap and Has a Price

Maybe that's true about both the fundamentals and the dip-buyers. But if this market correction was about flushing out complacency, such stubborn defense of the bullish case after just one very bad day feels like reason enough to stay worried.

"If there was a more fundamental force in its [the market decline's] cause, we might be inclined to make changes," says James Paulsen, chief investment strategist at Wells Capital Management, who has decided to stand pat with his portfolio recommendations and weather this storm. "I think when it calms down we're left with a cheaper market, and we can make some plays there," he says, adding that there may be a few more days of volatility before things calm down.

But Paulsen caught himself: "What makes me wonder is that too many people seem to be saying that same thing."

Margie Patel, portfolio manager at Pioneer Investments, had a similar thought amid Tuesday's selling. "Absent fundamental bad news, I don't see how this correction could be that big of a correction," she says. "Admittedly, that is how the Thai baht looked too," before its seemingly innocuous 1997 devaluation led to the so-called Asian contagion that roiled global financial markets for a year.

Liz Ann Sonders, chief investment strategist at Charles Schwab, agrees that "there is still a lot of complacency," and worries that the "financially engineered" liquidity created from the trillions of dollars of derivative products sold to thousands of hedge funds could be the cause of something more dangerous than a 3%-4% drop in the stock market.