Equity Investing for a New Era: The Return of Alpha

The economy and markets that have emerged from the pandemic fundamentally changed. For equity investors, we believe this means a different opportunity set than the one that prevailed over the past decade and a half ― and one that favors alpha (excess return) over beta (market return).

Key takeaways

  • The era of easy money is ended. The post-pandemic era is setting up to be more volatile with greater differentiation across individual stocks.
  • Beta, or market return, is sufficient when a rising tide lifts all boats. In the more traditional investing landscape now forming, we see alpha at the center.
  • A more discerning market that prices stocks on their underlying fundamentals is an opportunity for skilled stock pickers to outperform.

It’s not 2019 anymore … or any of the 10 years that preceded it. The pandemic period, inclusive of the crisis response and aftermath, roused an entirely new set of circumstances upon which the economy and markets are just now establishing their footing. For equity investors, we believe this burgeoning regime change means a different opportunity set than the one that prevailed over the past decade and a half ― and one that favors alpha (excess return) over beta (market return).

"We see stock selection becoming more important as individual companies adapt to a higher-inflation, higher-rate world with varying degrees of dynamism and success."