Alger Breaking Views: Finding Alpha in the Heart of the Storm?
Good quality companies going down with some that are less well positioned is kind of like throwing the babies out with the bathwater. In this brief video, Alger Director of Market Strategy Brad Neuman discusses how high correlation between stocks and the S&P 500 may allow active managers to find quality companies that shouldn’t be down as much as they are. ​​​ ​

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BRAD NEUMAN:
  When Investors are anxious and fearful like they are in the current environment, they begin to sell anything that they can, often going into liquidation mode.  That causes correlation between asset classes to rise.  It also causes correlation between stocks to rise.  In fact, correlations between stocks and the S&P 500 are the highest they’ve been on record with data going back at least two decades.  That means that good quality companies are going down with some companies that are less well-positioned.  It’s kind of like throwing the babies out with the bathwater.  And we think that this opens up a good potential for active managers who are good at picking stocks.  They can find those quality companies that maybe shouldn’t be down as much as they are.  For instance, cyber security companies.  Those provide services that are very difficult to cut back on for companies, even in painful economic times.  Recent results suggest that some of those companies can continue to grow through this terrible economic storm.  We believe that active managers will be able to find those companies and potentially generate alpha in the period to come.








Source: FactSet, Evercore ISI, and Alger Analysis
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The S&P 500 is a stock index that measures the performance of 500 large companies in the U.S.  

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