Like many of my co-workers, I listen to a lot of podcasts in my spare time. This one struck me as particularly interesting—so I thought I would recommend it.
The episode is from the Bloomberg Markets’ “Odd Lots” podcast series and discusses the growth of passive investing and how it has potentially affected markets in ways that may not have been anticipated.
Why The Rise of Passive Investing Might Be Distorting The Market
Bloomberg Markets’ “Odd Lots” podcast
For example, there is a conversation around how the DOL Fiduciary rule (introduced as a potential law in 2016) corresponds with a significant jump in the variance between active and passive flows, something you can see in this chart:Source: Morningstar.
You can also see how this shift has corresponded with a distortion in valuations at the same time.
Price to Sales of Large and Small Cap Stocks
There is plenty of discussion around what this shift to passive has done for active money managers, but I thought the conversation around how it has potentially altered the behavior of markets was thought-provoking. It was an interesting perspective that I hope you enjoy – now I’m off to listen to my Bachelor recaps…
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