My grandson is 10 months old, my daughter is 14 years old, and I’m in my fifth decade. Why do I bother to mention this? Because I believe that age is not unlike an investor’s time horizons for the stock market. Many investors -- most of them -- focus on the very short term of the stock market, a matter of months. Others take a slightly longer perspective, the years encompassing one full market cycle or more. And still others -- the smallest number of investors -- look at the market from a vantage point of decades.

I don’t need to tell you that from the time horizon of my grandson’s age -- the last few months -- the stock market has been absolutely horrible. All in all, 2008 is shaping up as one of the worst times ever for the stock market, with the S&P 500 Index down 38.2% as of December 19. This year has been so bad that it’s wiped out the positive returns achieved by the bull market of the previous five years, when the S&P 500 Index had risen an annualized 12.8%, according to Ibbotson Associates. And barring a big double-digit return for stocks next year, this will be the worst decade ever for stocks, even worse than the Great Depression decade of the 1930s. As of December 19, the stock market has lost about 3.8% annualized in this decade. In contrast, in the 1930s, stocks fell an annualized 0.1%. Even when you take into account all the enormous financial pain caused by the housing bubble and the financial crisis, we think an objective analysis indicates that this pain has already been amply reflected in the stock market this year and this decade.

The calendar year aside, from the intraday market peak on October 9, 2007 to the intraday market bottom on November 21, 2008, the S&P 500 Index fell 53.5%. As such, it’s our firm belief that investors have overreacted to the housing bubble and the financial crisis. And we believe that forced liquidations by institutional investors, mutual funds, and hedge funds, among others, have been at least partly responsible for the market overshooting on the downside. As a result, these measures happen to be at or near record lows: stock-market valuations (such as price/earnings ratios, price/book ratios, and equity-risk premiums), investor sentiment (levels of cash, the heavy use of options to protect against stock declines, bullish/bearish surveys of portfolio managers, and consumer confidence), and technical analysis (the number of stocks trading at their 52-week lows and below their 200-day moving averages).

At the same time, we think investors are underestimating the impact of the massive monetary and fiscal stimulus that the federal government has applied to the economy. The Federal Reserve has cut short-term interest rates from 5.25% to a range of zero to 0.25%. The monetary supply has soared. And most significantly, the government has made an unambiguous commitment to doing whatever it takes to shore up the financial system, including buying troubled derivatives and other securities and limiting home foreclosures. President-elect Barack Obama’s new economic team is impressive, and we look to that team and his administration to do what’s necessary to get the economy back on a growth track.

We are likewise encouraged by the steps the rest of the world is taking to fortify the global financial system and economy. For example, the United Kingdom is buying the preferred shares of its banks to bolster their capital, Australia is slashing rates, and China is launching an economic-stimulus package nearly as big as our own. Such coordinated, synchronized effort among the world’s governments and central banks is like nothing we’ve ever seen before. It prompts us to observe that if all these actions aren’t enough to ultimately stabilize the global financial system, then we have a lot more to worry about than just the stock market.

If it’s highly probable that the global financial system does right itself, then the only important question that remains is this: when does the stock market recover? In our estimation, it’s likely that our economy should begin to recover by mid-2009 and earnings, the engine that drives the stock market, should improve throughout the year. And though it remains to be seen if the low of the S&P 500 Index of 752.44 reached on November 20 will in fact prove to be the low for this market cycle, we think that stocks are likely to be higher 12 months from now and, more importantly, three to five years from now and over the next decade.

Normally, if investors were presented with the proposition to buy stocks that offer a likely downside risk of 5-10 % and an upside return potential of 30-50% (which we assess as the market’s risk/reward profile currently), they would jump at the chance. However, because of the extreme risk aversion that has a stranglehold on them now, investors are extremely hesitant to buy because they think the market’s future direction may continue to be down.

Of course, stocks are among the few things in the world that people are reluctant to buy when their price is cheaper; somewhat paradoxically, they tend to buy when they are thrilled that stock prices are rising, and they tend to not buy when they are depressed that stock prices are falling. Count on it: the same investors who wouldn’t dare buy General Electric at its current share price of about $17 will be clambering to buy it at $34 at some point. In a more rational world, an investor seeking to own good companies should prefer lower share prices over higher share prices, just as a shopper would rather have the opportunity to purchase a flat-panel TV on sale for $999 instead of $1,999. It should be noted that, for better or worse for buyers, consistently declining share prices aren’t the norm historically; the stock market has recorded positive total returns in 71% of the 83 years since 1926.

As noted earlier, we believe forced liquidations have helped to drive stocks to abnormally low levels. Well, there’s also such a thing as forced buying -- conditions that compel even pessimistic investors to buy stocks. We see some conditions in place that may bring at least some buyers back to stocks. In light of the stock market’s free fall since October 2007, we think nearly all the selling has been exhausted -- that is, nearly everyone who has wanted to get out of stocks has likely already done so. As a result, stocks could begin to move sharply higher with just a little bit of buying. As we see it, there are four prospective types of buyers:

First, pension plans and endowments, who have investment policies dictating a certain asset allocation to stocks in their portfolios. At year-end, their weighting in stocks should generally be considerably below their asset allocation, while their weightings in bonds and cash are likely to exceed the allocation. In our judgment, most of these pension plans and endowments will resist the temptation to change their policies toward stocks at the absolutely wrong time -- after so much damage has already been inflicted on stocks and after so much improvement in the risk/reward profile of stocks has occurred. Instead they are more likely to gradually bump up their stock exposure to the established allocation.

Second, investors in 401(k) retirement plans, who will resume making billions of dollars in contributions to their plans in the new year. And typically the most highly compensated employees tend to front-end-load their contributions and to invest more heavily than average in stocks.

Third, hedge funds, who in our analysis have raised a lot of cash to fund the redemptions of their investors. After their losses in 2008, hedge funds above all know that they will be under great pressure to generate positive returns going forward and thus can’t afford to miss any chance of capitalizing on a rising stock market (the market that history has proven best able to maximize their returns). So they may need to put their cash to work in stocks.

Fourth, foreign investors, who may gravitate to the U.S. stock market for two reasons: 1) they sense that since the U.S. stock market was the first market to turn downward, it may be the first to turn upward as well and 2) the U.S. stock market may serve as a refuge from their own badly battered stock markets. Although American investors, reeling from losses in their stock portfolios in 2008, may find it hard to believe, this year the S&P 500 Index is actually the best performer among the major regional stock indexes globally, such as the MSCI EAFE Index and the Dow Jones Asia-Pacific Index. We think foreign investors will like what they see in the U.S. market. For instance, they may like stocks such as General Electric that are yielding nearly 7%. And they may like stocks such as Apple, Google, Cisco Systems, First Solar, Intuitive Surgical, and Monsanto, all selling at price/earnings ratios that are equal to only about 50-75% of their long-term earnings-growth rates. Also, if the dollar continues to strengthen, they get a double bang for their buck -- or rather, a bang for their peso, ruble, euro, renminbi, or whatever the home currency happens to be.

In short, just a relatively modest uptick in buying from pensions and endowments, 401(k) plan participants, hedge funds, and foreign investors may be enough to push stocks out of bearish territory in 2009. The good news is that bear markets such as this one, which shoved stocks to an 11-year low in November, historically have been followed by bull markets. And just as significantly, a decade of negative or lackluster stock-market returns has been followed by a decade of soundly positive returns. For instance, stocks gained an annualized 9.2% in the 1940s and an annualized 19.4% in the 1950s, following the loss in the 1930s. And stocks were up an annualized 17.5% in the 1980s and an annualized 18.2% in the 1990s, after the below-average 5.9% annualized return in the 1970s.

In retrospect, the extraordinary stock-market returns generated in the 1980s and 1990s were driven by three blockbuster catalysts: the demographics of the dominant generation in American society, the baby boomers, whose income and spending were at their zenith; the collapse of communism in eastern Europe and the Soviet Union, which paved the way for hundreds of millions of people to benefit materially from the free-market system; and the rise of China, India, Brazil, and other emerging nations as economic powers.

Those catalysts helped to foster the globalization of trade, increased prosperity, easy credit, securitization, rich stock-market valuations, an enormous increase in liquidity -- and bubbles in Internet stocks, commodities, and housing. Alas, the bubbles in commodities and housing are among the most recent excesses that the global financial system and the stock market are now paying for this year, in the form of a global economic slowdown and, as of December 19, the second-worst annual decline in U.S. equities ever, exceeded only by 1931.

But there’s always a silver lining -- or as golfers say, "Every putt makes someone happy." With the excesses gradually being purged from the financial system, perhaps prudence and common sense will prevail once again. Perhaps consumers will put 20% down in buying a home, live within their means, and save more. Perhaps investment bankers will shun exotic forms of financial engineering and create securities that the capital markets can figure out and value. Perhaps financial-services firms and rating agencies will rediscover due diligence and appraise assets objectively and thoroughly. Perhaps banks will refrain from over-leveraging their balance sheets again. Perhaps regulators will regulate and governments will govern responsibly. And last but not least, perhaps investors will shake off their pessimism and realize that stocks are a good deal now, even in a recession; our research shows that 47% of the gains in a bull market are typically reaped in the first 12 months -- long before most recessions are declared to be officially over and long before most investors feel comfortable putting money back into stocks.

We don’t think all of this is entirely too much to ask in this season of hope and good will. And we think if all of this comes about, it will certainly make someone -- indeed, a lot of people -- more happy than any golf putt would. At the very least, we anticipate better days ahead for the financial system, for stocks, for us, and for you. And in this season of hope and good will, we trust that you are blessed with the things that matter most in life: good health, the love and support of family and friends, the joy of giving, good cheer, and faith in something bigger than any of us. We offer you, no matter what your age or investment time horizon, our warmest wishes for the holidays and the coming year.

Past performance is not a guarantee of future results.

The views expressed represent the opinions of Turner Investment Partners and are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities.

Turner Investment Partners, founded in 1990 and based in Berwyn, Pennsylvania, is an investment firm that manages more than $22 billion in stocks in separately managed accounts and mutual funds for institutions and individuals, as of September 30, 2008.