I understand that stocks like tobacco, defense, and beer are stocks that hold up better to bear markets, but I'm wondering if there are any stock that are negatively correlated with the S&P, when the market goes up they go down, vice versa
If you ar looking at defensive stocks go for ones with low betas as they are less affected by downward moves. If you want a product that goes up as the market declines there are a number of ETF's you can look at.
Like Bogan7 says, there are a few bear ETF's that will negatively correlate to the indexes. For example, DXD, Dow30 MZZ, MidCap400 QID, Nasdaq 100 SDS, S&P500 TWM, Russel2000 Arch
I should have said stocks that go up and the market declines, but stocks that still average 8% a year
Well no stocks of companies are "perfectly" negatively correlated with the markets. But if you're looking for the best opportunities in a bear market, you need to ask yourself, "is this a company that will attract business in a bad economy". As an example, car parts manufacturing companies generally do well in bear markets. The reason should make sense, people are more apt to repair their current car than to replace it if their jobs aren't secure. So basically, strong companies with business models that attract "less wealthy" customers are probably going to have the best returns during those times. Just look at your own buying habits. How do you save money? What types of products do you look for when money is a problem or less plentiful? Starting with your own habits and tendencies, you can extrapolate this out to the broader market which should help you "find" those companies best aligned for the bear market.
As Borat said so eloquently "In Kazakhstan we have saying: You show me stock that not decline in bear market, I show you pig that flies"
I definitely see what you are saying about how to select the do it yourself industries. I ended up pulling up a chart of the chart auto manuf. and notice that they are quite correl w/ the S&P. I think that they are correl w/ the S&P because it's just the fact that less people are having their cars fixed period. Those companies incomes are derived from car manuf and retail people
Well yeah...any "index" that you look at is going to be correlated with the market as a whole. Like I said, you aren't going to find any individual stocks that are perfectly negatively correlated with the stock market. What you can find are companies that are in the best position to excel during these time periods. Or for longer term plays (and safer investments), you can buy the industries (or asset classes) that have performed the worst during the beginning of the bear market (generally, these will be the biggest winners in the beginning of the next bull market. As an example, buying small cap value mutual funds at the very bottom of the bear market will very likely be huge winners as you swing into the next bull. But you can't buy them expecting them to bounce immediately. Sometimes it takes many months or a number of years for the investments to pan out. But here's an example of a stock (Carmax) compared to the S&P during the bear market of 2001-2003 ish. Carmax is a used car dealership. Now this doesn't mean that every used car dealership or parts manufacturer is going to perform like this. You still need to make sure the company is in good shape and that the company recognizes that they can perform good during downturns in the markets.