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The US equities market as a whole has gotten off to their most tranquil start this year since the mid-1960s, although a look under the hood shows “major disturbances happening on a stock level,” according to new research from JPMorgan Chase.

Over the first two months of the year, the S&P 500 has not posted a gain or loss of greater than 1 per cent, the first time this has occurred since 1966, according to Alex Dryden, a strategist at JPMorgan Asset Management.

Underscoring the sense of calm on Wall Street, the Vix index, a measure of expected S&P 500 volatility over the next month, has hovered between 10 – 12 since mid-January, far below the average of 19.6 since 1990, according to Bloomberg data.

Despite the low level of volatility, the S&P 500 has climbed 5.6 per cent since the end of last year, while the Dow Jones Industrial Average is in the midst of its longest record-setting streak since 1987.

However, the steady gains at the market level obscure the idiosyncratic movements of individual stocks. Indeed, Mr Dryden’s research shows that the average stock-to-stock correlation has fallen to its lowest level since the late 1990s.

The current environment is far better for active managers, who have struggled in recent years to match or beat the performance of passive products that follow indexes. Stimulative monetary policy from the Federal Reserve has helped to push the S&P 500 10.9 per cent higher a year on average since 2010.

In fact, research from Goldman Sachs shows that almost half of mutual funds that invest in large-capitalisation US stocks have beat their benchmark so far this year, up sharply from 19 per cent in all of 2016.

Copyright The Financial Times Limited 2017. All rights reserved.
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