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Panic doesn’t change fundamentals.

Try to remember that as what is so far a very scary correction challenges our ability to invest rationally instead of emotionally.

There are stocks that, if you own them, you should think about selling because the euro debt crisis has changed their fundamentals for the worse. This crisis by the time is has finally played out in the form of a convincing rescue package, new financial regulations, and changes in the way that the European Monetary Union works will result in lower growth in Europe, a cheaper euro, and cuts to government spending.

 The European Union is in aggregate the world’s largest economy so a slowdown in Europe is significant.

It means lower demand for such commodities as oil, copper, corn, and fertilizer. It means less growth in revenue and earnings for companies—including U.S.-based multinationals—with big sales in Europe.

A cheaper euro means more competition from Euro Zone companies in global markets and for companies from General Electric (GE) to Canon (CAJ). Besides potentially losing sales to euro-denominated competitors, non-euro-based companies will find it harder to raise prices.

Cuts to government spending, depending on where they fall, could be devastating to industries such as solar that depend on government subsidies for early-stage growth. (Solar stocks sold off yesterday, May 20, on just such fears.) If the cuts get deep enough industries that rely on government loan guarantees or financing could see growth slashed. (Think nuclear power, for example, and high-speed rail.)

All of these are very real ways in which the euro debt crisis is changing fundamentals for companies. And if you own shares in a company or industry that’s seeing fundamental damage from the crisis, then I think you have a rational reason to sell.

But I’d distinguish that kind of selling from panic selling where fear is the guide. Panic selling is selling simply because everybody else is doing it. Panic selling takes you out of the market near a bottom. Panic selling is selling just because the future, in some undefined way, suddenly seems too threatening to bear.

 I understand wanting to protect a portfolio against harm by moving to cash or investing in an ETF that shorts the market or a market sector. That’s perfectly reasonable. I’m practicing a little of that myself in Jubak’s Picks right now on bounces—if and when we get them.

I understand selling now to raise cash because you think there are even bigger bargains ahead. I advised that in my post )

And I certainly understand selling so that you can switch between a stock with damaged fundamentals and undamaged fundamentals.

Anyone trying to practice that kind of selling now can tell you that this is extremely rational and extremely difficult right now. Nothing panicky about it.

But right now there’s a lot of selling just for the sake of selling. I know it’s hard to hold onto perspective when every day brings another decline but it’s good to think back over the last six months and remember all the times investors worried about the sustainability of this rally because we hadn’t seen a good 10% correction.

Now we’re got one. And we should remember that a 10% correction isn’t the end of the world.

I’m not by any means trying to minimize the seriousness of the present market situation. We don’t know, as I posted yesterday ( ) that this is just a 10% correction.

I think we’re near a bottom for this sell off in the range of 1040 on the Standard & Poor’s 500 but I certainly can’t guarantee it. Looking at the likely news flow over the next couple of weeks I think we’re likely to see some improvement from the barrage of incredibly bad news that has fed into this drop. But that’s just my read of the likely news and real events could go in the other direction.

Longer term, say over the next three months, I think stocks are going to have plenty to worry about. I’d be surprised if stocks are a whole lot higher in September than they were at their April highs. So I’m not in any rush to buy on a bounce. I don’t think other investors are either.

And that in itself is a good reason to suspect that this will be a sluggish recovery from this drop over the next few months.