With low volatility and a slow grind up in the indices, the advantage is with the individual stock-picker these days. I'll take that advantage every day of the week, as it allows me to use my tools for effective analysis. If I'm right more than wrong and willing to take some risk, the edge I have in my analysis will equate to some nice wins -- regardless of the market performance.
What are good conditions for a stock-picker's market?
Low or declining volatility, less erratic movements in the put/call ratio, steady and calm news flow and strong breadth. Oh, and price action -- which is the most important -- is bullish. These are the conditions we find ourselves in now, but it won't always be so fruitful.
There are other characteristics that we see existing today as well, such as a market-friendly Fed. In a liquidity driven market the money often flows to stocks if the return opportunity is greater than in bonds, metals, cash or other asset classes.
In today's world a tweet or a brief news reference could trigger massive selling or buying by algo traders. When this is absent, however, it gives an advantage to the stock-picker's style to outperform the markets.
So far in 2020 the indices are up a solid 4.5% (give or take). That's following a year where indices rose 20% or more, so we are on pace for another strong year. Yet some stocks are up far better than the indices.
One just needs to look at Tesla (TSLA) , Amazon (AMZN) or Intel (INTC) , or Home Depot (HD) or McDonald's (MCD) . These stocks are up double-digits or more so far in 2020 -- spectacular returns for an entire year, let alone six weeks. But in a stock-picker's market the returns can be robust if the conditions are favorable.
Nevertheless, the conditions can change with the snap of a finger, so if you're performing well don't get complacent. The market may turn at a moment's notice, volatility could rise and it could turn into a disastrous situation if you're not paying attention. For now, though, carry on!