A Stock Picker’s Market
This year correlations among equities have moved significantly lower and as a result, we believe active managers are better positioned to beat their benchmarks. In the current environment, careful stock picking is paramount and skilled active managers tend to outperform.
  • High correlations among stocks indicate that the prices of individual securities move together, often propelled by macro factors such as central bank activity or geopolitical events. Conversely, lower correlations likely mean that stock-specific or idiosyncratic catalysts, such as earnings results, drive price changes.

  • Active managers generally perform better when correlations are lower because there is more opportunity to pick winners and losers, which is more difficult when stocks broadly trade together.

  • Recently correlations among stocks have moved sharply lower, dipping to the lowest level they’ve been at since the advent of quantitative easing. This has resulted in a “stock picker’s market.” Not only have the majority of active managers beaten their benchmarks year-to-date through July, but their outperformance is also the best they’ve achieved in many years.

The views expressed are the views of Fred Alger Management, Inc. as of August 2017. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, Inc. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

Fred Alger & Company, Incorporated 360 Park Avenue South, New York, NY 10010 / www.alger.com

800.305.8547 (Retail) / 212.806.8869 (Institutional) ​