It's not the economy, stupid

Sometime soon we'll see the end of the 2008 crash. When will the bear market bottom and stocks bounce? I don't know. But I do know if you're dwelling on the world economy as it is today you're going to miss most of the market recovery. Economic data lately hasn't been good. Investors fear a big, long-lasting global recession. What to do? Buy stocks. Bear markets always end long before news or sentiment improves and while the economy deteriorates.

Bear markets arrive when investors run to the sidelines because things seem bad without potential redemption - basic human nature causes many to rationalise a way to believe misery will endure and progress remain dormant forever. These same folk end up missing the initial surge of the next bull market. Fact is, today doesn't much matter. Today's fundamentals were priced in long ago. Markets constantly look way into the distant future-so should you.

In every bear market I've studied, stocks turn around as the economy worsens - except for those few where there was no recession at all. In the last seven US recessions, stocks stopped falling an average five months before the economy did.  Even if a global recession is here or one's just ahead, it's too late to sell - stocks already reflect that scenario and then some. It's no small irony so-called economic indicators only describe the past. That's useless data for investors. Better to ignore lagging reports.

Don't expect headlines to ever announce the turnaround - the thrum of bad news will drone on and on through 2009 and long after stocks rise-particularly with the media the grumpy the way it is now. Any improvement will be seen as "a sucker's rally" - considered an opportunity to get out before bigger declines appear. New bull markets thrive on such pessimism-defiantly climbing past investors stubbornly focused on yesterday's data by reflecting the recovery ahead. We likely won't know the real catalyst for the reversal until well after stocks have rallied hard.

What to ponder instead? Where the economy will be in a few years.

My guess is most of today's angst will be a distant memory. Those who got scared out of tech in 2000-03 didn't find those problems around by 2004. Three years from now we won't be worrying at all about the 2008 credit crunch demons. By now, the bulk of the financial crisis must be past, US elections are done, and stocks have already fallen enough to account for a big global downturn.

Beat the recovery

There won't be a much better time to buy stocks for many years - get them now before the recovery is priced in. Don't dwell on today - look to a brighter future ahead, that's where markets will focus. Do it with stocks like these five-all in strong, stable fields, with a defined franchise that's been undeservedly beaten up in the bear market.

Forest Laboratories (USA) is a small (sales, £2.4 billion) vendor of patented drugs like Lexapro for depression (more than half of sales and growing), Namenda for Alzheimer's and Benicar for hypertension. It's inherently recession-resistant, and its sales and profits should grow over time. The balance sheet is strong, with long-term debt only 4% of total assets. But the stock is off 35% this year out of fear that drugs now in the pipeline won't work out. The shares are going for 6.7 times earnings in the year that ends next March, and 1.7 times revenue. The company is a plausible takeover target.

Travelers Companies (TRV) - listed in New York - is a rock-solid insurer for both people and businesses. Cheaper than most of its peers, it suffered collateral damage from the bomb that hit bank stocks, but doesn't have anything like the portfolio losses that dragged down the rest of the financial sector. Trading for just 7.5 times 2008 earnings, and with a 3% dividend yield, it should be much higher several years out.

New York-listed International Paper (IP) is cyclical because there are periodic bouts of overcapacity in the paper business that take prices down. But it should hold up fairly well in the recession. The stock is half where it was ten years ago and is down more than the market this year. It goes for 7.7 times 2008 earnings and offers a 8.6% dividend yield.

Repsol is the largest Spanish oil producer, with £53 billion of annual revenue and production of just over a million barrels of oil equivalent daily. (ExxonMobil does 4.2 million.) Repsol has tremendous growth potential. It sells at 7.9 times likely earnings for this year and 50% of revenue, and has an 8% dividend yield.

What the world needs now is a happy face. France's L'Oreal can help. It sells £13 billion a year of health and beauty products. So far this year the stock has done worse than the market. But this high-quality firm does well in good times or bad. Coming out of the last bear market its stock was stellar. Its multiple of 17 times this year's earnings deserves to be higher. The dividend yield is 2.4%.

Ken Fisher is chairman and CEO of Fisher Investments