The Momentum Bubble

Endless passive investment flows validate any prior price, no matter how ridiculous. This amplifies mispricing and makes betting on Momentum a winning trade. Can that last forever?

TLDR Summary

• Stocks are the assets with the highest expected returns and active managers notoriously underperform. Those two ingredients are driving people into passive ETFs. These now account for more than half of all funds out there and the rotation from mutual funds to ETFs is not showing any signs of slowing down.

• Endless fiscal liquidity creation mak…