Sometimes the market as a whole goes up because the economy as a whole is going strong, and sometimes the market goes up because individual stocks are doing really well. According to data compiled by the ConvergEx Group, we appear to be in one of the latter times.
The correlation among the ten sectors in the S&P 500 was just under 70 percent in July. That was down from 89 percent the previous month, and is at the lowest level that figure has been in two years. In other words, different parts of the market are moving more independently of one another than they normally do.
What does that mean for investors? In a more correlated environment, investors can just put their money in the market and expect the rising tide to lift all boats. In a less correlated environment, stock picking becomes more important, as investment managers must make smart selections. That makes actively managed funds - of the type we use here at Echelon Wealth Strategies - a wise choice in this landscape.
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