Rising and Falling Markets

Cumulative return shows how much a strategy outperformed the index, but not when. This is an important question for investors: the answer determines what to expect from a strategy in a bull market and what to expect in a bear market.

How we calculate this

We divided the 312 months from January 2000 to January 2026 into two groups based on the performance of the S&P 500 TR.

207 up months

66% of all months; the index rose by an average of 2.70% per month

105 down months

34% of all months; the index lost an average of 3.15% per month

For each strategy, we calculate two measures:

upside advantage - how much, on average, the strategy’s return exceeded the index’s return in months when the index rose;
downside advantage - the same measure for months when the index fell.

A positive value means the strategy performed better than the market: it rose more in up months and lost less in down months. These measures are similar to the standard upside and downside capture metrics, but are expressed as differences in returns.

Average monthly excess return over the S&P 500 TR, %

Show values in a table

Strategy	Upside advantage	Downside advantage
EMERALD	+0.08%	+3.15%
STABILITY	-0.37%	+2.46%
DIVIDEND	-0.37%	+2.21%
AVICORE	+0.48%	+2.20%
POWER	+1.06%	+1.76%
YELLOW	+0.84%	+1.69%
INDIGO	+0.13%	+1.47%
GREEN	+0.35%	+0.85%
Blended strategy	+0.28%	+1.97%

Average monthly excess return of each strategy over the S&P 500 TR. Solid bars and bold values in the table indicate statistically significant results (t > 2); outlined bars indicate results that are not statistically significant. Backtest, January 2000 - January 2026.

What the chart shows

AVI’s advantage comes mainly in falling markets. In market down months, all eight strategies lost less than the index on average, with statistically significant results for seven of the eight. EMERALD illustrates this most clearly: in the average market down month, when the index lost 3.15%, EMERALD ended the month roughly flat.

The picture is different in rising markets: most strategies perform roughly in line with the market. Only POWER outperforms the index by a statistically significant margin in up months. STABILITY and DIVIDEND lag slightly in these months - the price of their downside protection.

Based on these two measures, the strategies fall into two profiles.

Defensive profile

EMERALD, STABILITY, DIVIDEND, AVICORE

The advantage comes almost entirely in falling markets. In rising markets, performance is roughly in line with the market.

Two-⁠sided profile

POWER, YELLOW

They outperform the market in both down and up months, but pay for this with deeper drawdowns during crises.

GREEN’s results are statistically indistinguishable from the market in both up and down months.

What this means for investors

Defensive strategies should not be expected to beat the index in every strong up month. Their role is to weather declines with smaller losses, then rise with the market from a higher base. This is how the difference in cumulative return built up over 26 years.

At the same time, annual excess returns over the index should not be expected to track the number of down months neatly. On average, each down month adds about two percentage points to the blended strategy’s advantage, but over a single year this effect is lost in normal market noise. Our data show that in both calm and turbulent years, the blended strategy outperformed the index by roughly the same amount on average. This advantage emerges reliably only over a period of several years.

Limitations

The measures are calculated from a historical backtest and describe averages over 26 years. An up or down month is defined by whether the S&P 500 TR’s monthly return is positive or negative, so movements within the month are not taken into account.

Full strategy results are available on the home page.

Past performance does not guarantee future results. This material is for information only and is not investment advice.