Near-term and long-term correlations are converging, but are still below historical averages. As a result, we think there are many potential options for positive performance through the selection of risk-diversifying assets and individual names. In short, we still see this as a stock picker’s market.
The correlation figure measures how each asset return moves in relationship to the broader basket of asset returns listed on the X axis. When correlation are high or rising, it may indicate that economic movements and sentiment are driving the majority of returns, which could potentially make security selection challenging.