Watch out—the ‘index bubble’ is bursting: Trader

The easy days of taking a bullish position on stocks as a whole and watching them soar has come to an end. So warns investing strategist and currency trader Boris Schlossberg of BK Asset Management.

With the S&P 500 roughly flat for 2015, "It may be that the "index bubble" is finally starting to burst and stock pickers will rule the day once again," Schlossberg said Tuesday.

"Everybody is just so absolutely certain that the only way to go is through index investing that we may just be getting a blowback," he said on CNBC's "Trading Nation." Meanwhile, "stock pickers are so beaten and battered by the market."

After six incredible years for stocks, Schossberg predicts that "you're going to see these averages actually be very average through next year."

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For instance, Schlossberg looks back to the long period from 1966 to 1980, when the Dow Jones industrial average was flat, making it "a stock pickers' market all the way through."

Meanwhile, as stocks have been flat in 2015, correlations among stocks have fallen, presenting an opportunity for those who choose given stocks over others.

"If current trends continue, look for 2016 to be a good year for active management as correlations continue to decline," Nicholas Colas of Convergex wrote in a Tuesday note to clients. "These managers have been stuck between a rock and a hard place for the better part of a decade, but they should be on more solid footing going forward."

Meanwhile, over the past six years, the popular SPDR S&P 500 ETF (SPY) has nearly doubled.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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