Stock pickers rejoice: How sector correlations are breaking down

ON UK INCOME

After the year's mega equity rally, intra-sector correlations are breaking down and seemingly similar stocks are seeing radically different performance, explains Lazard's Alan Clifford.

2013 has been a great year for UK equity income investing. The IMA UK Equity Income sector has, unusually, outperformed a rising market thanks to the defensive rally during the first half of the year. However, valuations in some sectors have risen significantly and research from Barclays shows that across Europe the premium paid for low volatility safe haven sectors is approaching its highest level since the 1980s. In the UK, this is most apparent among some of the consumer staples, such as beverages. Another global phenomenon is the easing of correlations within sectors, which means ...