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Market Extra: The ‘stock picker’s market’ has gone up in smoke

Recently, almost every security in the U.S. stock market has seen big moves, and increasingly, they’re all moving in the same direction.

Wall Street’s spikes in volatility have coincided with a return of high stock-to-stock correlation, which could mean a far more difficult environment for stock pickers as security selection is seen as harder when all issues are moving in tandem, fluctuating on macroeconomic issues rather than being driven by company-specific factors.

Correlations had been dropping for a while, resulting in something of a renaissance for active-fund managers, who individually select the securities held in their portfolios, rather than simply mimicking the holdings of an index, as passive funds do.

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