From one perspective, the quarter that ended yesterday simply marked the latest bad news in a bear market that has shaken the world's financial system to the core. Yet although it boggles the mind that anyone could find a silver lining amid the gloom, stock investors actually seemed happy about the market's losing more than 11% over the past three months.

As of the end of March, the S&P 500 marked its sixth consecutive quarter of falling values. In fact, its drop was the second-worst of the bear market, with only the fourth quarter of 2008 surpassing its loss in percentage terms.

Breathing a sigh of relief ... for now
If you've been paying attention to the markets, however, it's easy to see why investors have smiles on their faces. Just a few weeks ago, it seemed like things would end much worse. At its March lows, the S&P had dropped fully 25% from its year-end levels, and plenty of well-known stocks that had already suffered big hits in 2008 had gotten pounded again.

Stock

2008 Return

Return 1/1/2009 to 3/9/2009

Return 3/9/2009 to 3/31/2009

Las Vegas Sands (NYSE:LVS)

(94.2%)

(76.1%)

112.0%

Freddie Mac (NYSE:FRE)

(97.8%)

(49.3%)

105.4%

Prudential (NYSE:PRU)

(66.3%)

(61.6%)

63.8%

International Paper (NYSE:IP)

(61.8%)

(61.5%)

60.0%

Harley-Davidson (NYSE:HOG)

(62.1%)

(49.8%)

59.0%

Ameriprise Financial (NYSE:AMP)

(56.9%)

(40.4%)

48.5%

Titanium Metals (NYSE:TIE)

(65.9%)

(53.3%)

33.1%

Source: Capital IQ, a division of Standard and Poor's.

Yet as you can see, the March rally let these and many other stocks recover at least part of their steep losses. So while investors can hardly feel good about their overall performance since the end of 2007, they nevertheless have something to celebrate.

The bigger question, though, is where stocks go from here.

What goes down must go ... ?
There's no question that stocks were due for some kind of bounce. After all the bad news investors have heard over the past couple of years, it would've taken a major failure of either the financial system or some company as yet unaffected by the recession to surprise already pessimistic shareholders.

In the absence of a brand-new major economic problem, one could easily argue that stocks are looking for any excuse to rally. In support of an ongoing rebound, market historians will inevitably point to the last time stocks had this long a losing streak: 1969-70. Following that period's 30% drop, stocks rebounded 38% in the next 10 months, recovering nearly all of their losses.

Still, history doesn't necessarily repeat itself. Think back to the late 1990s, when everyone thought that after years of great performance, stocks would have to correct in 1997 ... or 1998 ... or 1999. Those who sold early missed out on some of the strongest gains of the bull market. Similarly, those who think the bear is over could be sorely disappointed.

What would hurt the most
In my experience, the market tends to do whatever the fewest people expect. Given that most people are looking for either a big rally from here or a drop to new lows, I think the biggest surprise would be a series of head-fake moves from the market. Rallies will reverse themselves, while periods of falling stocks will bounce back before bears can retake control. That's what happened throughout the 1970s, as the bull market that followed the 1969-70 bear eventually fell prey to the much harsher bear market of 1973-74, and stocks subsequently bounced around for years.

It's also consistent with how the economy looks right now. With automakers still in trouble, unemployment apparently not yet having topped out, and another quarter of potentially disappointing corporate earnings around the corner, there are plenty of depressing things that investors will have to listen to. Yet as bad as things have been, investors also seem to take heart whenever positive news comes out, limiting further losses.

Ignore the noise
For most investors, the message remains the same: Don't pay too much attention to short-term movements, and instead have a plan that will carry you through the next several years no matter what happens. Even if the market ends up going nowhere, you can still position yourself to take full advantage when a lasting recovery does come.

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Fool contributor Dan Caplinger is putting his money where his mouth is. He doesn't own shares of the companies mentioned above. Titanium Metals is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy always takes you forward.