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Large-Cap Mutual Funds on Pace for Best Year Since 2007

Large-Cap Mutual Funds on Pace for Best Year Since 2007

January 10, 2023

Active management is once again proving its worth, especially in volatile markets. As U.S. stocks wrapped up their worst year since 2008, the Wall Street Journal (WSJ) reports that stock picking is paying off.

Citing research from Goldman Sachs, the WSJ says that as of November 16, 2022, 55% of actively managed large-cap mutual funds are on pace to beat their benchmarks in the year. That’s the largest share since 2007.

The WSJ points out that higher interest rates, inflation, and concerns about a recession have put a premium on picking stocks — as the old days of just throwing money into growth stocks and watching them keep on rising are gone. In fact, while tech shares have caused a good deal of trouble in the overall indexes, Dow Jones Market Data finds that the percentage of stocks outperforming the S&P 500 as of December 21 was the highest in roughly two decades, creating a wealth of opportunity for stock pickers if they know where to find it.

As Ameriprise Financial Head of Equity Research Justin Bergin told the WSJ, “Buy an exchange-traded fund and everything is going to go well — that’s not going to work anymore.”

The article also points out that analysts expect active strategies to “extend their dominance” in 2023 as the S&P 500 remains top-heavy and Federal Reserve Chairman Jerome Powell has indicated that he will not be putting the brakes on rate hikes anytime soon.

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