Fund managers' stock picking accuracy hits 2-year low in July as prices decouple from data, Bank of America says
Wall Street stands empty as people stay away from the area due to the coronavirus on March 30, 2020 in New York City.Mutual fund managers largely underperformed their benchmarks in July as macroeconomic focus blocked out stocks' dismal fundamentals,Large-cap active funds' hit rate was just 28% last month, its worst in two years, as managers failed to find names outperforming the market.
Growth strategies across small-, mid-, and large-cap funds outperformed core and value approaches as investors remained crowded in safer plays.Large-cap active funds' hit rate — the share of stock picks outperforming the broader market — reached just 28% last month,said Thursday, its worst reading in two years. That comes despite stocks enjoying their best July since 2010. The average fund lagged its relevant benchmark index by 0.
Managers expecting worse-than-expected economic data to drive a market slump were also flustered. A slowdown in consumer spending and hiring activity drove fears of a prolonged recession, yet indexes continued to creep higher on stimulus hopes. Correlations neared peak levels over the month, the analysts said, indicating a greater focus on macroeconomic trends than stocks' fundamentals.A stock chief for $7.
Still, only 20% of growth funds beat their benchmarks. Concentration in the Russell 1000 led active managers to mostly miss the market's best performers. While growth funds gained the most, value and core managers fared better in picking winning stocks in their respective fields.
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