Passive Flows Are Propelling the Market Again
These steady inflows can act as an accelerant in rallies but they can also amplify declines when momentum turns negative.
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Stocks are back at record highs and a familiar force seems to be in play: automated retirement contributions, otherwise known as passive investing. These steady inflows can act as an accelerant in rallies, stabilizing markets after selloffs — but they can also amplify declines when momentum turns negative.
All I hear is superlatives to describe how the recent rally has unfolded. My colleague Tracy Alloway noted that the benchmark US index has effectively rallied over 3% per week for the last three weeks, something that’s happened only seven times in nearly 100 years.