Of the major market strategists, Sam Stovall of has done more than any other to influence my thinking. He is currently the chief equity strategist at Standard & Poors, but perhaps more importantly, he just plain “gets it.” The old rules of Wall Street (buy and hold, diversify, use index funds, etc.) haven’t been working for at least a decade. Stovall offers an alternative set of rules that hold the promise of generating systematic outperformance. Like any self-respecting strategist, Stovall puts these rules to the test and evaluates their performance.
Each rule is its own trading system. Stovall rates them based on consistency of outperformance, risk-adjusted returns, and total returns relative the market.
Stovall’s Book The Seven Rules of Wall Street is a great introduction to simple trading systems. It is relatively brief (just 165 pages), which is why he seems to miss some important points. In this blog series, I’ll walk you through Stovall’s strategies and offer suggestions on how they can be made to work even better. Each day for the next week, we’ll introduce a new rule.
This will be worthwhile reading….