The 733-point drop in the Dow Jones Industrials on Wednesday is a sign the global credit crunch is hitting home -- and hitting retailers and businesses across America.

We've just entered the second phase of the bear market in stocks. We're past the panic about bad news in the banking sector. Now, we've moved into the stage where investors accept that stocks are falling because business is going to be bad in the months ahead.

Many thought the headlines about falling home prices were a unique situation, the bursting of the housing bubble. Now we have proof that the slowdown has spread through the economy.

Retail sales fell 1.2% in September, the third consecutive month of declines. This is the first time since comparable records began in 1992. Not even the fear after Sept. 11, 2001, could stall the consumer this badly.

And, remember, the horrible financial headlines didn't really start until October! Now every consumer knows that tough times are coming, and more people are thinking twice about spending. You can be sure that all businesses are making plans to cut back on production and lay off employees. The vicious downward recessionary spiral has begun.

If you're asking about bear markets, historian Jim Stack says the median "bear market" duration since 1929 is 15 months. In 1929, the bear growled for 33 months and attacked again for 42 months, starting in 1938, ended only by World War II. More recently, we suffered through a 30-month bear market, starting from the peak in 2000.

The recession is another story. According to the National Bureau of Economic Research, the average duration of post-World War II recessions is 11 months from peak to bottom. The longest decline came from November 1973 through March 1975, a total of 17 months. The last extended recession came from July 1981 through November 1982. Then there was a brief downturn from July 1991 through March 1992.

But those recession statistics only mark the drop. Some recoveries were quick -- a "V" formation, while others dragged on, an "L" formation. History doesn't give a reliable guide to economic rebounds.

One fact is obvious: Most people under age 40 haven't had to cope with a real recession in their working lifetime! This slowdown will come as a shock.

So here's one small consolation: Stock markets tend to rebound before the economy, giving investors something to cheer about during the worst of the slowdown. And that's The Savage Truth.

Nobody ever made a dime by panicking, says Jim Cramer. Moneymaking opportunities exist despite the market turmoil. So where's a market master like Cramer putting his money these days? Check out his personal portfolio at Action Alerts PLUS. Take a free trial now.
Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage's personal finance column in the Chicago Sun-Times is nationally syndicated. She was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. Savage currently serves as a director of the Chicago Mercantile Exchange Corp.