"In his latest note, the AllianceBernstein strategist argues that the trillions of dollars pouring into index funds aren't just tracking markets - they are distorting them. Big Tech's dominance, he says, has been amplified by passive flows that reward size over substance. Investors are funding incumbents by default, steering more capital to the biggest names simply because they already dominate benchmarks."
"He calls it a "dystopian symbiosis": a feedback loop between index funds and platform giants like Apple Inc., Microsoft Corp. and Nvidia Corp. that concentrates power, stifles competition, and gives the illusion of safety. Unlike earlier market cycles driven by fundamentals or active conviction, today's flows are automatic, often indifferent to risk. Fraser Jenkins is hardly alone in sounding the alarm."
Trillions of dollars flowing into cap-weighted index funds are altering market dynamics by allocating capital based on size rather than fundamentals. Passive flows reinforce incumbent platform giants, amplifying Big Tech dominance and creating a feedback loop that concentrates power, stifles competition, and presents an illusion of safety. Automatic, indifferent flows can increase systemic risk if trends reverse. Ten companies now represent over a third of the S&P 500's value, driven by tech gains. Weak antitrust enforcement and the rise of artificial intelligence may further entrench market concentration and reduce effective capital allocation across the economy.
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