Some recent charts have sparked my thoughts on whether it’s really a stock picker’s market. There seems to be a significant challenge in achieving above-average returns through individual stock trading.
One chart that caught my attention comes from Citadel’s Scott LaVerner. It illustrates the correlation between stocks in the S&P 500—indicating how they move relative to each other. Essentially, a high correlation means stocks are shifting together, while a low correlation indicates independent movement.
According to Rabner’s data, this correlation has dropped to its lowest level in at least 15 years.
A lower correlation indicates that stock prices are straying from the S&P 500 average. This creates more opportunity for traders who focus on picking individual stocks, hinting at a possible “stock picking market.”
But I think it’s worth noting that having more options doesn’t necessarily mean it’s easier to beat the market.
In these markets with low correlation, there’s a possibility of being heavily invested in underperforming stocks, while missing out on the ones that do well. Both strategies could lead to disappointing results compared to market averages.
Just last week, Hardika Singh from Fundstrat pointed out some stocks that are either outperforming or underperforming the S&P, which are impacting the overall market trends.
Interestingly, since memory and storage stocks peaked on June 22, the S&P 500 has climbed nearly 1%. However, there’s been quite a bit of turbulence among individual stocks. For instance, Micron, SanDisk, and Intel have all seen significant drops—18% for Micron and SanDisk and 20% for Intel. Concerns over tech giants over-investing in AI are affecting these semiconductor stocks.
Yet, the index hasn’t felt those declines heavily because gains in other sectors, like financials and healthcare, have more than compensated. For example, Moderna’s stock is up 29% and Axon Enterprises has seen a 42% rise since that date.
So, getting these stock trades wrong can really hurt your performance against the broader market.
I should add, that while many traders are managing to outperform the market, it’s usually a challenge.
Low equity correlations do not appear to correlate with the performance of active managers.
Rubner’s graph reveals a downward trend in correlation over the last 15 years. One might expect that this more uncorrelated environment would allow actively managed funds to achieve better performance.
But, data tells a different story. Most active large-cap funds have consistently underperformed the S&P 500 over the years, and, notably, 2025 marked one of the weakest performances for active managers in the past 15 years.
Specifically, only 38% of large-cap active funds managed to outperform the Russell benchmark in the first half of 2026, as noted in BofA’s report.
So, discrepancies in stock performance still pose a challenge for many active managers.
Moreover, picking stocks continues to be difficult because very few generate above-average returns over time, which can skew the market averages significantly.
Consequently, not recognizing the few successful stocks might lead to disappointing overall returns.
Many “buy” ratings can actually be a positive sign.
Another chart caught my eye regarding stock selection, particularly from John Butters at FactSet. This one shows how analysts rate individual stocks in the S&P 500, and it’s interesting—many analysts are leaning toward buy and hold rather than sell.
With 12,840 ratings in total, there seems to be a preference for buying and holding stocks over selling.
However, given the historical tendency for most stocks to perform poorly, some might argue that these bullish ratings could actually backfire for investors acting solely on them.
I lean towards a different perspective. If you hold a variety of stocks, your chances of accessing companies with remarkable returns improve and, as a result, can enhance your portfolio’s performance.
So, those numerous buy-and-hold recommendations might actually be beneficial when building a diverse stock portfolio.
Of course, this assumes you can identify those standout stocks amid the noise.
The big picture
I believe there are definitely skilled stock pickers who thrive during these low-correlation times. However, this does not imply that lower correlation guarantees better performance for everyone trying to pick stocks.
It’s also worth mentioning that having faith in a specific company or stock can be valid, especially if you’ve done thorough research. Sometimes, your gut feeling about an industry can be as valuable as conventional wisdom.
That said, when I hear phrases like “This is a stock picking market,” I tend to be cautious. Just because stocks are diverging from their averages doesn’t necessarily simplify the task of finding outperformers.
