We have been talking for some time now that the focus on macro variables would eventually give way to good old fashioned stock picking. One condition for that was a broader recovery in the economy. That being said we are not free of macro-effect like the recent spike in oil prices. Having peaked in the early Fall of last year implied correlations have continued to tumble. The question is in what direction will stock pickers go? The rally to-date has been focused on small stocks. It does not necessarily follow that lower correlations imply ‘quality stock’ outperformance but they may be worth a closer look. In today’s screencast we note the implication of falling stock correlations.
Items mentioned in the above screencast:
Josh Brown, “Did you realize that we’re picking stocks again?” (The Reformed Broker)
Correlations are still falling. (MarketBeat)
Is the age of quality stocks finally here? (Barron’s)
The spread between large caps and small caps is “frightening.” (Bronte Capital)