One of the most important trends underpinning markets today is the passive bid.
That’s simply the term for the fact that money comes into the market. If you’re participating in a 401(k) plan, you’re part of the passive bid. Each payday, the money that gets deducted from your paycheck goes into your investment funds.
In turn, that money moves down to individual stocks that get bought up. Payday after payday after payday.
In time, this trend could reverse. A rising unemployment rate. Higher withdrawals from retirees from stocks as they shift to bonds.
Until that shift changes, it’s a structural reason why stocks are the best game in town – and why investors should buy market pullbacks.
Today, the passive bid is also drawing capital to crypto. Just consider how Vanguard’s small-cap ETFs are regular buyers of Strategy:
Vanguard’s Strategy holdings now top 8% of the company – and rising
Strategy – formerly MicroStrategy, until its market cap hit $100 billion – is best known today for aggressively buying bitcoin and holding it. Given that Strategy is in a number of funds, there’s already passive money flowing to shares today.
The money flowing to Strategy could soar even higher if the company is added to the S&P 500 later in the year.
For now, we prefer bitcoin to Strategy, given that shares trade at a premium to their bitcoin holdings. With positive crypto legislation on deck from Congress this week, however, expect both bitcoin and Strategy shares to add to their recent gains.
~ Andrew
This is Elon Musk’s Next Tech Disruption…And it could turn the entire AI market upside down.
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P.S. We see cryptocurrencies as a key part of President Trump’s Great Reset plan. However, it’s more likely that stablecoins, rather than bitcoin, Ethereum or the like, will get the most attention in the coming months.
Stablecoins take a dollar, issue a token, and then the process is reversed at some point. But stablecoins also invest those dollars into U.S. Treasurys. With stablecoin demand increasing, it could become the lynchpin for refinancing America’s debt at a reasonable interest rate.
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