Tags: Hulbert | stock | bear | markets

Hulbert: Stock Investors Best Off Just Riding Out Bear Markets

Monday, 10 Mar 2014 07:44 AM

By Dan Weil

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While the five-year-old bull market in stocks won't last forever, that doesn't mean you have to abandon stocks, says Mark Hulbert, editor of Hulbert Financial Digest.

"Unless you think the next bear market and subsequent recovery will be worse than average, sticking with stocks is the best response to the certainty that, sooner or later, the current bull market will come to an end," he writes in The Wall Street Journal.

The good news is that in bear markets since 1926, it has taken only 3.3 years on average for stocks to rebound above the peak they reached before the bear market started, Hulbert says.

Editor’s Note:
18.79% Annual Returns . . . for Life?

While it took the stock market 5.3 years to recover from the 2007-09 bear market, he notes, that bear market came amid the worst financial crisis and economic downturn since the 1930s.

William Bernstein, co-principal of money-management firm Efficient Frontier Advisors, tells The Journal he is concerned that the stock market's return this century won't match that of the last century, and as a result recoveries may take longer.

One solution to that is investing in value stocks, Hulbert says.

"Adjusting for dividends and inflation, so-called value stocks — those with the lowest ratios of price-to-book value, a measure of net worth — have exhibited the quickest bear-market recovery times over the past 90 years of any of the investment styles measured by Eugene Fama and Kenneth French, finance professors at the University of Chicago and Dartmouth College, respectively," he adds.

Many experts anticipate a correction for stocks soon.

"I think we're bumping up against fair value for stocks, so unless we make some dramatic change to our economic and earnings growth expectations, then I think we either have to correct in time or in price," Sam Stovall, chief strategist of S&P Capital IQ, tells CNBC.

Editor’s Note: 18.79% Annual Returns . . . for Life?

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