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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
FINALLY.
The Return of the Stock Picker’s Market
The U.S. equity market may look steady on the surface but rising dispersion and falling correlations among S&P 500 stocks reveal a far more dynamic environment beneath. Shifts in the AI narrative, rotations out of mega‑cap tech, improving economic conditions, and accelerating inflows into active strategies are all driving performance gaps across sectors, with more value-tilted and economically sensitive sectors emerging as early 2026 winners.
Against this backdrop, investors may benefit from active management, selective stock picking, and sector‑rotation strategies designed to capitalize on broader dispersion and the increased opportunities it presents.
Never before have we had to wait so long into a new calendar year for someone to declare this a “stock picker’s market”. Really, is it even a new year until someone does so? So thank you, Adam Turnquist, chief technical strategist for LPL Financial, for at long last turning a leaf on 2025 and officially ushering in 2026. 🫡
However, stock picker’s markets are a bit like London buses. You wait for ages and then several turn up. From Bloomberg yesterday:
“There’s going to be an end to this, and I would say that the end is closer than most people think. AI disruption, I think is a bit bombastic, quite frankly,” said Brian Belski, founder and chief investment officer of Humilis Investment Strategies. “This is not a formula or playbook-driven market — this is a stock picking market, and you just have to be right.”
And CNBC today:
The next phase of the market is likely to reward bottom-up investing rather than broad index moves, according to Kenneth Andrade, Founder & Chief Investment Officer at Old Bridge Asset Management, who believes the coming cycle will favour careful portfolio construction.
“2026 is opening up to be a great stock-picker’s market.”
Now, it’s entirely true that high dispersion and low correlations make for a more fertile environment for traditional active management.
That smaller stocks and less pricey ones have also outperformed so far in 2026 also tends to be good for fund managers, who in aggregate have an understandable slight bias against the biggest stocks (its awkward to explain to investors your value-add if your holdings just look like the market’s 10 biggest stocks).
Bank of America also recently noted that half of all the large-cap US equity funds it tracks surpassed the Russell 1000 in January (while studiously avoiding to declare it a stock picker’s market). So the set-up looks favourable.
But how did things turn out in 2025, the last year that was declared a stock picker’s market?
Oh.
OK, maybe this year is the year where everything changes. Perhaps 2026 is when central banks/passive funds/FANGs/Mag7/fiscal policy/buybacks finally stop wrecking market signals (delete according to preference), and stockpickers can stage their comeback.
We’ll just have to wait and see. It’s anyone’s guess how this could turn out.
Further reading:
— The Myth of the Stock-Picker’s Market (Morningstar)
