ETFs Have Created A Bigger Bubble Than Dot-Com Era
A market expert predicts that ETFs have fueled a market bubble that will put the dot-com crisis to shame, according to Business Insider.
Steven Bregman, the founder of Horizon Kinetics, recently stated that "there is nowhere within 'the market' to avoid this." He believes the whole market is at bubble valuations. "It is therefore a far greater systemic danger than during the 1999 environment."
Bregman believes that the cause of this bubble is passive investing. Passive investing has become increasingly popular amongst younger generations and driven mega-cap tech stocks through the roof while leaving actively managed funds in the dust.
In 2019, exchange-traded funds raked in $328 billion in investments. Bregman believes the massive ETF inflow is attributed to artificially low-interest rates and passive investing.
"Essentially, the stock market has — through its reshaping by the indexation business model and ETFs' asset accumulation — lost substantially all of its sources of resilience in the event of some jarring change to the present economic environment, whether that might a credit crisis, interest rate spike, inflation surge, etc," Bregman said.
A market expert predicts that ETFs have fueled a market bubble that will put the dot-com crisis to shame.