Battered Active Managers See Salvation in Churning Stock Market

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Battered Active Managers See Salvation in Churning Stock Market  Bloomberg
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After going half-insane watching a tiny cabal of technology megacaps rule stock indexes all year and make their benchmarks almost impossible to catch, active fund managers may be on the verge of liberation.

Positive vaccine news is fueling optimism that an economic reopening is no longer a pipe dream. That's sparking a rotation into a much broader array of beaten-down companies, such as small-cap and value shares. With the S&P 500 no longer ruled by just five names, active investors may finally have found the kind of target-rich environment where their skills thrive.

"If you're small enough and nimble enough, you can take advantage of these opportunities," said Doug Ramsey, Leuthold Group's chief investment officer. "The S&P 500 has been a very difficult bogey for the last four or five years."

As everyone knows, the coronavirus pandemic and lockdown unleashed a seemingly endless bid for tech titans such as Facebook Inc., Amazon.com Inc., Apple Inc., Microsoft Corp. and Alphabet Inc. The group has surged nearly 67% since March's lows, powering a 60% rebound for the S&P 500 in the process. As an illustration of how hard it has been to find alpha, at the height of the tech mania in August, just 30.6% of the stocks in the S&P 500 outperformed the index over the prior year -- the lowest share since July 2000, according to data from Leuthold Group.

Harder to Beat Tech gains…
Katherine Greifeld, Lu Wang
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