RE-Wave3_LOcom-Articles-Unpredictable.jpg

Is the stock picker back?

For quite a while now, stock pickers have had a hard time. Once venerated for their ability to identify movements on the stock market before they happened, they have spent more than a decade being out performed by passive funds which track a market-weighted index.

Less than 15 per cent of US stock managers have succeeded in beating their benchmarks for the past 15 year, according to S&P Dow Jones Indices. But, in the first half of 2017, all that changed. Since then, 54% per cent of stock pickers have beaten their benchmarks.

Why? One explanation is what analysts at US money managers Bernstein are calling “The Great Correlation Collapse1.” “Correlation” describes the tendency of stocks to move and up and down together.

High correlations make it hard for active managers to find price discrepancies they need to beat the stock market. But, for the first time in a while, correlations have been low and stock pickers have taken advantage. According to some experts, the long-suffering stock picker could be back.
 

Infographic-Complete.jpg

1 The Great Correlation Collapse Continues - Where to Look for Alpha? by AB Bernstein

 

Important information

This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

Read more.