The question on many people’s lips is whether the stock market has reached bottom or whether there is still a ways to go before we get there. If the market hasn’t bottomed out yet, is it time to take your money out and wait for sunnier days?

First, let’s look at the causes of the decline and the government policy responses required to get us out of our ever-weakening situation. Then we’ll move on to a forecast and some words of advice.

The most fundamental reason for our decline is overspending on the part of the consumer. Our blind belief in the inevitability of continuing rises in real estate value—which many used as a rationale for borrowing heavily to finance purchase of properties and take out “profits” from existing homes’ price appreciation—added to the problem. A too-lax regulatory environment that allowed financial firms to create seemingly safe mortgage-backed securities from groups of low-quality, highly leveraged loans rounded out the picture.

The country’s prospects are like a stool. It has four legs, all of which are needed to bring the economy back to an upright position.

The first leg is consumer confidence, which is perhaps the most important. Consumers must feel more optimistic about their country and their future. The fact that surveys indicate they believe problems will persist for at least two years is actually a plus, since it makes further disappointment somewhat unlikely.

The second leg is the bank problem. It will likely be taken care of through the purchase of bad mortgages and other loans, direct injections of money, and further guarantees for selected banks—all by the federal government, which is another way of saying by you and me. The outcome will be the resumption of loans to both businesses and consumers.

President Barack Obama and Congress are in charge of the third leg: the economic revitalization process. It won’t be 100 percent efficient—no plan involving politicians ever is. The current outlay will at least moderate the decline. Also, look for more spending.

Finally, the fourth leg is real estate itself, which should bottom out sometime in 2010. Until then, there won’t be a major upturn unless inflation is ignited. But the lack of further declines will make lenders and borrowers of mortgages feel more secure.

Putting it all together, the economy will continue to be notably weak during most of the second quarter of 2009. The second half of the year will be favorably impacted by the government stimulus package, and the rate of decline will slow noticeably. The economic upturn will be mild and should occur sometime in 2010.

In contrast, the stock market could be lower during the first half of 2009, but it could be up significantly from today’s level one year from now. The market will likely anticipate the economic turn by about six months, although there will be a lot of skepticism on the part of some investors, given the fact that layoffs will continue for the foreseeable future.

Whether the forecast on the bottom comes out to be prescient or far off is much less important than the answer to the following question: Are stocks fundamentally attractive now? I believe that if you fell asleep financially today with a normal investment asset allocation under your pillow and woke up five years from now, you would get up with a smile on your face. So don’t be cute in waiting for the turn—it could cost you the first 30 percent of the move from today’s levels, no matter when the market makes new lows.