A Brutal Week For Investors; Will There Be More Zigs Than Zag???

For investors, a brutal week ended Friday with prices plunging for stocks and commodities. The Dow Jones industrial average fell 531 to 16,460, a 3.12 percent drop.

Oil's tumble was especially notable. For a while, West Texas crude was trading below $40 a barrel — the first time that happened since March 2009. It finished at $40.45, marking an eight-week stretch of price declines — the longest losing streak since 1986.

Want to play it safe and just earn interest on your savings? Sorry. The yield on a 10-year Treasury note also fell, down to just 2.05 percent, the lowest level since April.

So what's an investor supposed to do?

Experts are mixed about the outlook. Some say not to worry too much: This downturn was an inevitable "correction," following one of the longest bull runs in U.S. history.

For example, the S&P 500 index of stocks has risen five out of the past six years. On Friday, it fell 3.19 percent to 1,971. But that's just a hair below where it was last year at this time. So if you have been invested for six years, you're still ahead of the game.

From this viewpoint, the August rout is just part of the typical "sawtooth" pattern that characterizes the stock market. Prices can zigzag up and down, up and down. Over time, you make money because you are patient, and assume the "down" zigs are smaller than the "up" zags.Instead of fretting, investors should be looking for opportunities to buy shares at low prices before they resume their climb.

Maybe this stock plunge signals something much worse than a simple correction. Maybe prices are plunging because a new global recession is taking hold, making any rebound impossible for a long time.