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The video in this report is only accessible to members

Key Takeaways

  • While the market has struggled so far in 2022, the environment for stock picking has been favorable.
  • Historically, when value outperforms growth, more stocks outperform the overall benchmark. Such an environment provides a tailwind to stock picking.
  • Stocks are also moving independently of one another. We provide two measures to evaluate the degree of stock independence, both of which indicate stock performance is being driven to a large degree by idiosyncratic (stock-specific) concerns.
  • Investors are using management expectations to distinguish between stocks so far in 2022. During the Q1 earnings season, companies that beat their estimates saw a historically large premium relative to companies that missed earnings.

Introduction

2022 has not been a kind year for the equity markets. Through May 24, the S&P 500 is down 17.3% year-to-date, while the Nasdaq 100 is down 27.9%. The market’s struggles this year can be attributed to a newly hawkish Fed and inflation that has proven to be stickier-than-expected, which has impacted both consumer spending habits and bottom line earnings numbers for corporates. These headwinds have led to significant losses across the equity landscape, particularly in the technology, discretiona...

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