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80% of the stock market is now on autopilot

CNBC reports:

It’s no secret that machines are taking up a bigger and bigger share of investing, but the extent of their influence is approaching shocking proportions. It is as high as 80%, according to one major investing firm.

Passive investments such as index funds and exchange-traded funds control about 60% of the equity assets, while quantitative funds, those which rely on trend-following models instead of fundamental research from humans, now account for 20% of the market share, according to estimates from J.P. Morgan.

This means so much of stock trading is now in the hands of automated buyers and sellers that the market is increasingly sensitive to headlines and more prone to sharp price swings, many notable investors believe.

Omega Advisors founder Leon Cooperman previously said computer trading is creating a “Wild West” with the markets, calling for an investigation by the Securities and Exchange Commission. [Continue reading…]

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