It will be interesting how this boom in the market comes to an end. Each day it gets a little scarier.
Most professional money managers are benchmarked to an index. So, if the index goes up, their portfolio needs to keep pace. Why? Because many investors, who are not steeped in the workings of the securities markets, demand it. If they don't keep up, it could put the portfolio manager at risk of losing their job.
The portfolio manager might know that securities values are really stretched, but few have any choice but to keep up with the pack. This causes excessive trading as they try to get the next investment that will move the index up or stay ahead of it. If they are wrong, they dump that investment and move to another.
Passive investment helps to drive the market higher since they are just "keeping with the flow". Passive doesn't analyze. They just buy the proportion.
All this activity causes a self sustaining process that is market driven versus value driven. More attention is paid to the market than the fundamental values of companies.
It is not even Halloween and it looks scary!
