| Global trade worries are spurring lockstep moves in US equities, a headache for stock pickers trying to beat an already unpredictable market. Nearly three weeks into earnings season, a gauge of realized correlations between stocks in the S&P 500 Index stood at 0.6 as of April 30, more than twice its average at this point in quarterly reporting periods going back to 2011, data compiled by Bloomberg show. A correlation of 1 implies two assets are moving perfectly in tandem. Earnings season is a time when stocks are more likely to go their own way, as investors react to disparate results and company outlooks. But worries over the looming effects of tariffs — which can hit companies’ bottom lines in addition to the global economy — have dampened those individual moves. That creates a problem for active fund managers, who try to beat the market by finding companies trading at discounts to their peers. Nearly 38% of large-cap stock managers are outperforming their benchmarks in the month through April 28, compared to 54% over the first three months of the year, Morningstar Direct data showed. “Elevated correlation has persisted, driven by the outsized influence of macro forces — including tariff headlines, central bank guidance, and key data points,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group. “Markets remain tightly tethered to macro signaling, limiting the usual dispersion we’d expect from earnings beats and misses.” Active fund managers have famously underperformed their benchmarks throughout the years, while trillions of dollars poured into passive investments such as index funds. A majority of stock pickers last beat the S&P 500 in 2022, following a 13-year drought. We’re just past the halfway point in the number of S&P 500 companies that have reported, with results from about 200 due in coming weeks. — Natalia Kniazhevich | 
