Cliff Asness Blasts Those Who Call It "A Stock Picker's Market"

Cliff Asness would politely request people stop saying "It's a stock picker's market." While pairwise correlations have dropped to post-crisis lows, they remain elevated to 'normal' levels but, as Asness rages, perhaps asset managers who rely on this 'weak' phrase should more honestly note "I think they mean, "We will have to pick stocks now because the market isn’t making us money the easy way."



One of Cliff Asness' Pet Peeves...

I don’t know what it means to say, “It’s a stock picker’s market.”

It may mean the whole market isn’t going straight up now so you have to make your money picking the right stocks, but I don’t understand why active managers would suddenly get better at stock picking at those times. Note that I do think a valid use of this concept may occur when, after adjusting for market moves, there is not a lot of dispersion in stock returns, meaning that individual stocks tend to move in lockstep, leaving little idiosyncratic volatility — a necessary (but not sufficient!) ingredient to generate outperformance (assuming one is unwilling to lever up smaller differences at these times). But that’s a quant measure, and I don’t think that’s what many people mean by this comment.

I think they mean, “We will have to pick stocks now because the market isn’t making us money the easy way.” To the extent I’m wrong, I withdraw the peeve (is there a specific form I need to file for that?).

Similarly, you often hear financial professionals say such things as “forecasting market direction from here is exceptionally difficult” in a tone conveying “gee, this is really strange.” Well, I think forecasting the market over short-term horizons is always exceptionally difficult.

If they said, “Our market-timing forecasts are mostly useless most of the time, but right now, they are completely useless,” I suppose I’d be OK with it, but I’m not holding my breath that they will.


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