A major reason for the decline in the US investment-class market is a change in how investors approach buying and selling stocks.
Investors are now looking at the broader sector, where a significant portion of the stock market has gone, rather than focusing on individual stocks, analysts said.
Investors have moved away from the buy-and-hold mentality and instead are taking a longer-term view, looking at a broader portfolio, said Steven Rolfes, a senior economist at Morgan Stanley.
Rolfes said that’s a shift from the 1980s when investors were focused on individual companies and the stocks they owned.
“I think the more we understand the entire sector, the more it’s becoming less about the stock and more about the company,” Rolfs said.
The most significant change in the market is the shift to a long-term portfolio approach.
Rolfers said the more information you have about the entire industry, the less you’re looking at individual companies.
“It’s the same thing with mutual funds.
It’s the broader market, it’s the sector,” he said.
“When we look at the entire market, we’re looking more at the overall sector, and that’s where the big winners are.”
Rolfers noted that a large portion of that change is due to the changing structure of the US equity market.
The US equity markets were historically more conservative and held stocks that would go on to outperform in the short term.
In the past, those stocks were often based in China, India and other emerging markets, while smaller companies in the United States and abroad.