When stocks trade too similarly, it’s tougher for stock pickers to profit from unique opportunities.
The average three-month stock correlation on the S&P 500, a gauge of how uniformly stocks on the index trade, jumped from 9% in January to 52% last week. That was the largest and fastest increase outside of 1987, according to David Kostin, Goldman Sachs’ chief US equity strategist.
But there’s some good news for stock pickers: Kostin expects correlations to fall, as regulation on tech companies and other policy risks create more individualized opportunities.
“We expect correlations for these stocks would likely revert to historical averages and read more >>>