Prior Bear Markets: A Poor Guide to Future Newsletter Performance

by Mark Hulbert

Mark Hulbert recently spoke at the 2015 AAII Investor Conference. For information on how to subscribe to recordings of the presentations, go to for more details.

The stock bear market that began in October 2007 has been such a traumatic event in the lives of so many investors, that it is likely to dominate investment decision-making for years to come.

Whether that’s a good thing, however, is an open question—I’m not so sure that it is.

That’s because performance in bear markets is a poor guide as to how an adviser or strategy will perform over the long term. And this is true not only because the stock market historically has had an upward bias. It’s also because performance in one bear market is a poor guide to returns in subsequent bear markets.

The Data

I support these bold claims with reference to the Hulbert Financial Digest’s database of investment newsletter performance. That database, of course, contains returns independently calculated by the Hulbert Financial Digest (HFD), using its standard methodology.

Key elements of that methodology include executing all model portfolio transactions on the days that subscribers could actually act on the newsletters’ advice, and debiting transaction costs such as bid-ask spreads and discount brokerage commissions. In addition, if a newsletter has more than one portfolio, then the HFD calculates a composite reflecting the average of its several portfolios, including those that may have been discontinued over the years.

Let’s begin the discussion with the data in Table 1, which lists the top 10 newsletters on the HFD’s monitored list based on their performance during the 2007–2009 bear market.

On average, these 10 newsletters produced a 4.3% annualized return during this bear market—in contrast to a 38.7% annualized loss for the overall stock market, as represented by the Dow Jones Wilshire 5000 total return index.

Newsletter 2007–2009 Performance Through  Contact
Bear 4/30/2009 (%)
Market* 5 Yrs 10 Yrs 15 Yrs 20 Yrs
Peter Eliades’ Stockmarket Cycles 23.4 3.0 3.2 1.6 4.2 800-888-4351
Stealth Stocks Daily Alert 7.5 na na na na 800-524-4832
Yamamoto Forecast (The) 6.2 10.9 na na na 808-877-2690
P. Q. Wall Forecast, Inc. 5.0 1.8 1.4 -3.7 na
On the Money 2.7 1.0 4.4 na na 800-772-5789
Martin Weiss’ Safe Money Report 2.5 0.7 na na na 800-844-1773
Stealth Stocks 2.3 3.4 na na na 800-524-4832
National Investor (The) -1.4 10.2 na na na
Growth Stock Outlook -2.4 3.0 3.4 5.0 5.2 301-654-5205
Growth Fund Guide -2.6 8.7 9.3 4.2 4.9 605-341-1971
Average of Above 10 Newsletters 4.3 4.7 4.3 1.8 4.8  
DJ Wilshire 5000 Total Market (w/divs) -38.7 -2.0 -1.6 6.5 7.6  

Now focus on how these 10 newsletters have fared historically. Over the last five and 10 years (through April 30), these newsletters on average are well ahead of the market—which is not surprising given the extent of their market-beating performance during the recent bear market. But notice that, even given their impressive returns in the recent bear market, they on average are behind the overall market for performance over the last 15 years and last 20 years.

This pattern is not limited just to the top performers in the most recent bear market. Take a look at Table 2, which lists the top 10 performing newsletters during the 2000–2002 bear market.

Newsletter 2000–
Performance Through
4/30/2009 (%)
5 Yrs 10 Yrs 15 Yrs 20 Yrs Contact
Peter Eliades’ Stockmarket Cycles 15.9 23.4 3.0 3.2 1.6 4.2 800-888-4351
Growth Fund Guide 10.8 -2.6 8.7 9.3 4.2 4.9 605-341-1971
Investment Quality Trends 10.7 -39.8 -2.1 4.5 7.6 8.7 866-927-5250
Blue Chip Investor (The) 6.7 -38.3 -3.4 0.5 5.5 na  
F.X.C. Newsletter (The) 6.6 -31.5 0.5 2.8 6.4 7.8 800-392-0992
Coolcat Explosive Small Cap Growth              
  Stock Report 5.7 -10.5 -5.5 11.4 na na 559-875-0613
Growth Stock Outlook 3.6 -2.4 3.0 3.4 5.0 5.2 301-654-5205
Buyback Letter (The) 3.6 -37.5 -0.9 4.1 na na 888-289-2225
Superstock Investor 2.3 -25.3 -2.1 1.9 4.4 3.9 800-894-3424
Investors Intelligence 2.1 -18.2 1.6 2.6 4.2 5.3 914-632-0422
Average of Above 10 Newsletters 6.8 -18.3 0.3 4.4 4.9 5.7  
DJ Wilshire 5000 Total Market (w/divs) -20.7 -38.7 -2.0 -1.6 6.5 7.6  

Once again, these newsletters are ahead of the market over the last five- and 10-year periods, but they are behind a buy-and-hold position for performance over the last 15- and 20-year periods.

Furthermore, many of the top performers in the 2000–2002 bear market did not acquit themselves very well in the 2007–2009 bear market. In other words, top performance during the 2000–2002 bear market was not a guarantee of performing well in the subsequent bear market.

Lastly, take a look at Table 3, which lists the 10 newsletters with the best performance over the 10-year time period that ended with the stock market high in March 2000. Perhaps not surprisingly, given that this 10-year period was so bullish, these newsletters on average have not produced stellar returns over the last five- and 10-year periods (through April 30). On the other hand, over the last 20-year period these newsletters on average beat the market, coming out well ahead of the average for newsletters that came out on top during either of the last two bear markets.

Newsletter 10 Years Performance Through  
Through 4/30/2009 (%)  
3/31/2000 5 Yrs 10 Yrs 15 Yrs 20 Yrs Contact
Louis Navellier’s Emerging Growth 27.2 -7.8 -2.9 4.2 8.6
Prudent Speculator (The) 23.5 -3.4 7.6 14.2 13.1 877-817-4394
Timer Digest 23.1 1.3 0.4 8.0 10.3 800-356-2527
Oberweis Report (The) 22.1 -8.1 5.6 5.8 10.4 800-323-6166
Medical Technology Stock Letter 21.4 -25.4 -5.2 -3.7 0.9 510-843-1857
Chartist (The) 21.0 4.6 -1.1 5.8 8.9 800-942-4278
No Load Fund*X 19.9 -0.9 5.2 11.2 10.8 800-763-8639
Cabot Market Letter 19.7 3.5 0.9 5.9 6.2 978-745-5532
BI Research 17.9 -20.2 -1.2 2.6 6.3
Fidelity Monitor 17.3 -0.2 2.8 6.5 9.5 800-397-3094
Average of Above 10 Newsletters 21.3 -5.7 1.2 6.1 8.5  
DJ Wilshire 5000 Total Market (w/divs) 18.5 -2.0 -1.6 6.5 7.6  

The Bottom Line

Given our recent trauma, most of us would readily accept a Faustian bargain to retroactively give up much of our bull market returns in order not to have lost so much in the bear market. But the data do not suggest that this is a rational trade-off.

If history is any guide, you will be better off going with newsletters that have the best long-term returns, even if that means incurring sizeable bear market losses.

It appears that it is more important to perform well during the bull markets than it is to perform well during the bear markets.

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In other words, the best thing we can do for our portfolios might be to forget that this bear market ever happened—as difficult a task as that might otherwise be.

Mark Hulbert is editor of the Hulbert Financial Digest, a newsletter that ranks the performance of investment advisory newsletters. It is published monthly and is located at 5051B Backlick Rd., Annandale, Va. 22003; 703/750-9060.


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