Stock picking may be back, for real.
The Federal Reserve is finally moving further away from easy monetary policy and is on track to raise interest rates two or three times this year. Inflation is rising, the U.S. economy is improving, and potential tax reform and infrastructure spending under the Trump administration could add to that growth.
And those economic themes indicate to many active managers that 2017 may be the year the art of selecting stocks can bring better returns.
"I do think we might be at a very critical turning point for investors," said Ronald Temple, managing director and co-head of multi-asset at Lazard Asset Management.
"For the last eight years I've been worried about the risk of deflation," he said. Now as inflation is on the rise, "transitions like this can be great opportunities for active managers to deliver" returns better than the market at large.
Already this year, five of the S&P 500 sectors are negative, while the top performer, materials, is up 5 percent.