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Bear Market Punishes Shadow Stocks But Qualifying Stocks Abound

by James B. Cloonan

Bear Market Punishes Shadow Stocks But Qualifying Stocks Abound Splash image

Just when you think it can’t get worse—it does.

The stock market is punishing every sector, and it is punishing its favorite children—micro-cap and extreme value stocks—the worst. Maybe it thinks they have been too spoiled over time, but as of this writing (year-to-date through November 30, 2008) the Model Shadow Stock Portfolio is down 51.1%. This is worse than the 37.7 % loss for the S&P 500 as measured by the Vanguard S&P 500 Index fund VFINX as well as below our other benchmarks, as can be seen in Table 1 and Figure 1.

While such underperformance is unusual (you can see the 16-year history of the portfolio in Table 1), everything about this market is unusual, as is the character of its underlying economy.

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James B. Cloonan is founder and chairman of AAII.


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