00:00Now for this overall market, we've seen a lot of divergences. Goldman Sachs saying that large
00:05cap active mutual funds are outperforming their benchmark in 2026 by the highest margin since
00:112007 as investors look beyond big tech. Charles Schwab chief investment strategist Lizanne Saunders
00:17notes something similar that over the past year, only 21% of stocks within the S&P 500 have beaten
00:23the index itself. Over the past month, it's 62%. And Lizanne joins me now. Lizanne, is this just
00:31evidence that you can't just buy the index and chill, that you have to be more choosy right now?
00:36Yeah, I think it is evidence of that. And we've had the view that you want to sort of shift
00:41away
00:41from monolithic investment decision making, which in years like 2024 and even at the start of 2025
00:48made sense, particularly cohorts like the MAG-7. That's no longer the case. And there is more
00:54connectivity to actual fundamentals, the direction of travel in terms of forward earnings estimates.
01:00And that's provided a lift to other segments of the market, leadership areas like energy and
01:06industrials and materials. It also helps to explain why non-US is outperforming because embedded in
01:13their economies are more of those traditional cyclical industry and sector drivers as we see
01:19diversification away from just mega cap tech. And I think that has legs this year.
01:23I was going to say the reason that in the past and work to buy the index is because of
01:27how exposed it
01:28was to the MAG-7, to mega cap tech is also embedded in this idea that there is more dispersion,
01:35one
01:35in which the mega cap stocks, the tech stocks just won't do for you what they used to, that it's
01:40no
01:40longer a world in which if you want to outperform the index, you have to be overexposed to that
01:45sector. Yeah. I mean, even last year, and this is, this is, I find a phenomenon that is often the
01:53case within the retail investing community is conflating the notion of contribution to return
01:59and performance rank. As an example of that, NVIDIA, the best performer last year among the
02:05magnificent seven. And it was the number one contributor to S&P gains, but it was the 75th
02:12best performing stock within the S&P. So there's actually been plenty of other areas and names
02:18where you did well from a performance standpoint. The contribution rank being much higher comes by
02:24virtue of the multiplier of the cap size. So as a retail investor, you're not benchmarked on a
02:30quarterly basis to the cap weighted S&P 500. And I think it's been brought more into the light that
02:35there's more fish in the sea than just that small list of names.
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