On Friday I showed that the low-cost asset managers like BlackRock and Vanguard are growing their business at the expense of actively managed funds. One reason is that sovereign wealth funds are shifting their strategy. The cash-flush funds were happy to splash their loot around when oil prices were high. And now?
They’re taking a more passive approach. It will be interesting to see where most of the money ends up. If it comes out of high-yield corporate debt and emerging markets, it could end up in the same two places I mentioned above: high quality government bonds and blue chip stocks.
That worries me because it’s what Charlie’s been talking about for the last month: a breakdown in breadth across all markets. You have a few positions driving the outperformance of the indices. But beneath the surface, you have hardly anything else making new highs. By measures of volatility and relative strength, there isn’t much positive momentum. The “momentum crash” approaches.
Category: Market updates