If You Can’t Beat the Market, You’d Better Hope It Falls

There’s an old Wall Street idea that sounds a bit cheeky, but it carries a serious warning: if you can’t beat the market, you’d better hope it falls. Why? Because history suggests that active stock picking tends to look “better” when the overall market is struggling—and it tends to look worse when stocks are rising strongly. This doesn’t mean anyone should wish for a bear market. It means investors should be careful about the stories they tell themselves, especially when they hear talk about a “stock-picker’s market.”

This article rewrites and expands on the core message of the MarketWatch column published on February 26, 2026: the distinction between a “market of stocks” (where individual shares move differently) and a “stock market” (where most shares move together) often lines up with the market cycle. When the broad market rises, beating it is hard. When the broad market falls, more active strategies can appear to shine—sometimes simply because the benchmark is easier to beat.

What People Mean by a “Stock Market” vs. a “Market of Stocks”

The “stock market” (everything moves together)

In a classic “stock market” environment, the big forces—interest rates, inflation, economic growth, and investor mood—push most stocks in the same direction at the same time. When that happens, it’s difficult for a stock picker to stand out. Even if you choose “good” companies, they can still rise and fall along with the crowd. In this kind of market, owning a broad index fund often works well because the index captures the overall ride.

The “market of stocks” (winners and losers split apart)

In a “market of stocks,” companies separate into clear winners and losers. Some business models hold up, others crack, and prices don’t move in a single pack. In theory, this is when skilled stock selection should have its best chance, because being right about the company matters more than simply being “in the market.” Commentators sometimes say this is when stock pickers should “get greedy,” because opportunities look more specific and more uneven.

The twist: this “market of stocks” idea often shows up in down markets

Here’s the catch: the MarketWatch analysis argues that these two “market types” are not random. They often connect to the market’s ups and downs. When the broad market is falling, stocks tend to separate more—because fear forces investors to judge companies more harshly, and weak balance sheets get punished. That’s one reason active strategies may beat the index more often during rough years.

The Data Story: When the Market Falls, More Stock Pickers Beat the Index

The column points to a long historical review going back to 1981. The key idea is simple:

• Each year has a broad market return (using the Wilshire 5000 Total Market Index as a stand-in for “the market”).
• Each year also has a percentage of monitored portfolios (such as investment newsletter portfolios tracked by the author’s auditing work) that beat that index.
• When you plot those years, the trend slopes downward: the stronger the market return, the fewer active portfolios beat it.

In plain language: when markets are booming, it’s tough to look smarter than the crowd. When markets are sinking, more active managers can avoid some of the damage—or at least lose less than the index—and that can count as “outperformance.”

A real example from 2025

The article uses 2025 as an example. The Wilshire 5000 total return was reported as up 17.1% in 2025, which is above long-term averages. In that strong year, only 31% of the monitored investment newsletter portfolios beat the index.

It also points to Morningstar’s research as a supporting signal. According to the column, Morningstar’s Active/Passive findings showed that only 38% of actively managed equity funds and ETFs beat their passive counterparts (in that comparison).

Why Beating a Strong Market Is So Hard

1) Indexes set a high bar in bull markets

When the whole market is rising fast, an index fund is like a wide net catching nearly every fish in the pond. Active managers, meanwhile, often hold some cash, avoid certain sectors, or hedge risk. Those “safety choices” can make them lag when everything is going up.

2) Costs and fees don’t disappear

Even a small fee matters. Index funds often charge very low costs, while active funds typically cost more. In a bull market, where returns can already be strong, those extra costs can be the difference between matching the index and falling behind it.

3) Big rallies lift “most boats,” even the leaky ones

In roaring markets, not only do great businesses rise—so do mediocre ones. That makes it harder for stock pickers to show skill, because the index is benefiting from the broad tide.

4) Risk controls can look “wrong” when risk is rewarded

Many active strategies are designed to avoid disasters. That’s smart over the long run, but in a year when risk is rewarded, the safest players can look slow and dull compared to the index.

Why Down Markets Can Make Stock Picking Look Better

1) Avoiding the worst stocks can help a lot

In a falling market, a manager doesn’t need to find a miracle winner to beat the index. Sometimes, just avoiding the big losers is enough.

2) Defensive sectors may separate from the pack

When investors get nervous, they may run toward companies with stable cash flows—like certain healthcare, consumer staples, or utility businesses. That separation can create a clearer map of winners and losers.

3) Valuation matters more when money gets tight

In tougher conditions, investors often pay closer attention to debt levels, profits, and real business strength. Companies that were “fine” during easy money can suddenly look fragile.

4) The benchmark becomes easier to beat

This is the part people forget. If the index is down, you can “win” by losing less. That can be real skill, but it can also be partly math and positioning.

The Danger: Rooting for a “Stock Picker’s Market” Can Mean Rooting for Pain

Here’s the emotional trap the column highlights: some professionals and commentators celebrate the idea that “now is finally the time for stock pickers.” But if history shows stock pickers beat the index more often when the broad market is falling, then wishing for stock pickers to shine can sound a lot like wishing for a bear market.

That’s not just a clever line. It’s a reminder that outperformance is relative. If your strategy “wins” mostly when the market is losing, you need to ask: are you comfortable with what that means for your overall wealth and goals?

Should Investors Switch Strategies Based on This Idea?

The column’s answer is essentially: not unless you can reliably predict bear markets. And most people can’t.

Changing your plan based on a prediction like “a bear market is coming, so I’ll switch to stock picking” is a risky game. It requires two tough calls:

1. Timing the exit (getting out of the broad market at the right time), and
2. Timing the return (getting back in before the rebound leaves you behind).

Miss either one, and you can end up worse off than if you’d simply stayed invested in a diversified portfolio.

What This Means for Real People (Not Just Pros)

If you’re a long-term index investor

Staying the course is often the simplest, most consistent approach—especially if you’re saving for goals that are years away. In many periods, broad index funds have been hard for the average active manager to beat, particularly after fees.

If you like picking stocks

You don’t have to quit. But it helps to be honest about what you’re doing:

• Are you investing, or are you also entertaining yourself?
• Do you have a process for risk, diversification, and position sizes?
• Are you measuring your results against a fair benchmark?

A balanced approach many people use is the “core and satellite” method: keep a core in low-cost index funds, then use a smaller satellite portion for carefully chosen stocks or active funds.

If you’re choosing an active manager

Ask how they behave in different market climates. Some managers look brilliant in a falling market but lag badly when stocks soar. Others track the index closely, meaning their “active” approach may not be very different at all.

Practical Takeaways You Can Use Today

1) Don’t confuse “more dispersion” with “easy outperformance”

Even if stocks are separating into winners and losers, it doesn’t guarantee stock pickers will win. Picking winners is still hard.

2) Understand what “beating the market” looks like in a down year

If the index falls 20% and your portfolio falls 15%, you beat the market—but you still lost money. That may be acceptable (even good), but it’s not the same feeling as winning in a rising market.

3) Keep expectations realistic

Many people underestimate how hard consistent outperformance is. A few great years don’t prove permanent skill. A few bad years don’t prove permanent failure either. It takes time and honest measurement.

4) Don’t rebuild your strategy around a forecast

The column’s warning is clear: unless you have a “crystal ball,” shifting your entire approach because you expect a bear market can backfire.

Frequently Asked Questions (FAQs)

1) What is the main message of “If you can’t beat the market, you’d better hope it falls”?

The message is that active stock picking tends to outperform more often during down markets, while it struggles more in strong bull markets—so wishing for a “stock picker’s market” can be similar to wishing for a market decline.

2) Does this mean active investing is better than passive investing?

Not automatically. It suggests active investing may have an easier time beating benchmarks in certain conditions, but it doesn’t guarantee success. Fees, skill, and discipline still matter.

3) Should I switch to picking stocks if experts say it’s a “market of stocks” now?

Be careful. The analysis warns against changing strategy unless you can reliably predict market downturns—something most investors can’t do well.

4) What index did the article use to represent “the market”?

It referenced the Wilshire 5000 Total Market Index as the broad market benchmark.

5) What happened in 2025 according to the column?

The column reported the Wilshire 5000 returned 17.1% in 2025, while only 31% of monitored newsletter portfolios beat the index that year.

6) Where can I read more about active vs. passive performance?

A widely followed source is Morningstar’s active vs. passive research (often discussed in their Active/Passive reporting). You can explore Morningstar’s site here: Morningstar.

Conclusion: Don’t Wish for a Bear Market—Build a Strategy That Survives One

It’s tempting to get excited when headlines suggest we’re entering a “stock-picker’s market.” But the deeper lesson is more sobering: stock pickers often look best when the broad market looks worst.

Instead of rooting for the market to fall just so a strategy can “win,” build a plan that can handle different seasons—hot bull runs, cold bear markets, and everything in between. Diversification, discipline, and costs matter in every climate. And if you do pick stocks, do it with a clear process, realistic expectations, and a safety-first core that doesn’t rely on perfect timing.

#SlimScan #GrowthStocks #CANSLIM