Sometimes You Have To Grind It Out

6/18/2012


With midyear 2012 shaping up a lot like midyear 2011, you'd be forgiven for feeling some nostalgia for the stock markets of the 1980s and 1990s, when keeping pace with double-digit annualized gains in the indexes was your biggest concern.

Now you face a U.S. stock market that has gone basically nowhere during this century, with the S&P 500 Index returning an annualized 1.0% since year-end 1999. You've seen two 50% market drops in a decade, two debt-financed wars, and too many scandals and hair-raising drops to count.

You could join the crowd and abandon stocks, adding to the tidal flow that has seen something like $1.4 trillion swing from stock funds to bond funds since 2007. Or you could play the hand you're dealt, looking for opportunities one stock at a time and raising some extra cash when the primary trend seems bearish.

That's what we've been doing this century. And while our absolute returns have not matched those of the 1980s and 1990s, we've delivered solid returns and handily outperformed the broad market. Whether the years ahead are lean or fat, we're confident our numbers-driven, growth-at-a-good-price approach will continue to pay dividends.

CONSISTENT OUTPERFORMANCE ADDS UP

Yearly total returns
Year
Dow
Theory
Forecasts
(%)
S&P 500
Index
(%)
Relative
Perfor-
mance
(%)
2012 *
5.5
5.1
0.4
2011
(2.4)
2.1
(4.5)
2010
14.1
15.1
(1.0)
2009
29.8
26.5
3.3
2008
(35.1)
(37.0)
1.9
2007
14.3
5.5
8.8
2006
13.6
15.8
(2.2)
2005
9.0
4.9
4.1
2004
14.7
10.9
3.8
2003
31.2
28.7
2.5
2002
(17.3)
(22.1)
4.8
2001
(8.5)
(11.9)
3.4
2000
1.1
(9.1)
10.2

Above are annual total returns for Dow Theory Forecasts, as calculated by the independent Hulbert Financial Digest. The Forecasts has outperformed the S&P 500 Index by nearly 3% per year, on average, since year-end 1999.

* Through May 31.
Sources: Hulbert Financial Digest, Standard & Poor's.


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