High volatility will persist throughout 2023, which will create opportunities for investors.Investors who are brave enough to navigate the recent market volatility are being rewarded for their efforts.
Active fund managers are currently having their best year of relative performance in a decade, according to BMO Capital Markets. The firm found that 62% of managers behind the 200 largest US mutual funds have beaten the S&P 500 in 2023 after 55% outperformed it in 2022.For most of the past decade, the S&P 500's strong returns made it much more difficult to top the market by picking stocks.
Second, the earnings growth and valuation gaps between US companies are unusually wide right now, Belski noted. That leads to opportunities for nimble stock-pickers, since the difference between winners and losers is more apparent. After steadily rising in the last year, next twelve months earnings growth dispersion for S&P 500 firms"ranks in the 98th percentile of historical monthly values going back to 1990," Belski wrote. And while the dispersion in NTM price-to-earnings multiples has fallen since its September peak, the strategy chief noted that it's still in the 85th percentile since 1990.
"We believe this trend of growing outperformance among active funds will continue throughout the year, particularly given the levels of differentiation on the earnings growth and valuation fronts across companies," Belski wrote.
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