Come Together

He say "One and one and one is three"

Got to be good looking 'cause he's so hard to see

Come together right now over me.

Come Together- The Beatles

One and one and one may be three, but something in the market just doesn't add up. Namely stock picking. It is harder and harder to be a stock picker in today's stock market. Fundamentals have taken a back seat to Euro solvency, Fed speeches, jobs reports, you name it. Stocks have "come together" and now trade alike no matter the fundamentals. 

The correlation of stocks in the S&P 500 is the highest ever, nearly 90%! That's higher than the crash in 1987 or 2008.

For most of history the correlation between stocks was 40% - 50%, but after 2000 we've seen a steady climb higher.

There's been a lot written about why this is happening, index funds, ETF's, high frequency trading, asset allocators, you name it. 

It really doesn't matter why stocks have "come together", all that matter's is that we are aware of this fact.

This high correlation may help create buying (or selling) opportunities in individual stocks, but only if the correlation subsides.

As long as this correlation continues we'll continue with our global tactical asset allocation strategy, and search for those rare uncorrelated assets.

Be careful out there, and keep the lights on,

Chris Wiles, CFA

412-260-7917

www.rockhavencapital.com

For prior Rockhaven Views visit:

www.rockhavencapmgmt.blogspot.com

This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management.  The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.