Strategist: Passive-investing bubble could trigger 1929-style crash

Michael Green, portfolio manager and chief market strategist at Simplify Asset Management, warns a 1929-style stock crash could stem from a bubble in passive investing. He says the risk from passive funds is far more pressing than any threat from the recent AI trade.

Green previously drew attention for saying $140,000 is the new poverty line and his firm manages over $10 billion in assets. Passive investing has surged over the past decade, with global passive assets under management rising more than 400% from 2012 to 2023 and overtaking active funds.

By Green's estimate, flows to passive funds are inflating US stock-market valuations by roughly 15% each year, an effect most pronounced among large-cap companies. He argues many investors have been allocated into "radically overvalued securities" with little fundamental link to recent performance.

United States

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