longshot prediction: the AI bubble gets popped this month by the SpaceX IPO, so get out NOW

[Happy Hoosier]

43. Something I think a lot of folks are missing are structural changes in the market.

In 2000 passive trading (trading in index funds) was less than 10% of the market. In 2012, it was about 25%. In 2026, it's over 50%. in 2012, about 30% of the total market was help in passive investments. That is now about 60%.

Mechanical investing (where investors make purchases regardless of market conditions) is now the dominant trade. That includes me, and pretty much anyone with a 401K in equities. Twice a month, about 14% of my salary goes towards purchasing index funds.... whther the markets are up, down, or sideways. Realistically, it's the only way I can build actual financial independence. I'll has SS, and a small pension, but that's "keep the lights on" money, not the kind of retirement I've been working for (at least in my head).

With mechanical investing making up so much of the market, there is a strong impetus to follow trends, which tends to increase volatility, but these same automatic investing algorithms also have a strong "buy the dip" element, which tends to feed the strong V-shaped recoveries we've seen and then the trend algoritms take over again.

Does that mean markets cannot crash? Nope. The weakness of the this means that the market is more vulnerable to unemployment and inflation. If mechanical investors are laid off, they stop contributing to their 401K's, and the built in demand decreases. If they are forced to withdraw 401K money due to job loss and inflation, the fund MUST sell, regardless of market conditions. That could be a disastrous cycle, if it's big enough.

So my thinking is no crash in the immediate future. Keep an eye on unemployment and inflation numbers. That's where the risk is. I still think we'll see an AI correction, but not at dot.com bubble levels. But what do I know... I'm just a guy on the internet trying to make enough return to retire!