Note: I don’t agree to what I’m about to say, I’m just providing an alternative view.
There’s a hypothesis that there’s a “passive investment” bubble. By some estimates, about 20% of the market is fueled by passive investment strategies and at a certain point, it divorces asset pricing to true fundamentals. I don’t know the transmission of this, but it makes sense- just like investors flock to the wrong ZOOM stock to inflate the price of a wrong stock, too many people passively buying ETFs has the downstream effect of people buying too many shares of something that isn’t valued properly.
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Note: I don’t agree to what I’m about to say, I’m just providing an alternative view.
There’s a hypothesis that there’s a “passive investment” bubble. By some estimates, about 20% of the market is fueled by passive investment strategies and at a certain point, it divorces asset pricing to true fundamentals. I don’t know the transmission of this, but it makes sense- just like investors flock to the wrong ZOOM stock to inflate the price of a wrong stock, too many people passively buying ETFs has the downstream effect of people buying too many shares of something that isn’t valued properly.
https://fortune.com/2019/09/14/passive-investing-stock-marke...