Additionally, the combined effects of an uncertain global economy and weak company earnings have made it particularly hard for active stock pickers to select winners this year, especially as many had an overweight opinion on the financial sector going into this year after the Federal Reserve hiked interest rates for the first time in almost a decade back in December 2015.
Over the course of 2016, global volatility gripped markets and shifted perception of macroeconomic outlook, which caused many investors to group individual company stocks into baskets that have only limited connection to fundamentals. Consequently, Merrill strategist Jill Hall argued that stocks have had tighter correlations with one another and provided less scope for active pickers to outperform.
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Meanwhile, the ongoing so-called earnings recession has also diminished the number of opportunities in the equities market, pushing more investors toward value, dividend payers and other bond-esque stocks.
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