80% of the stock market is now on autopilot

• Passive investments control about 60% of the equity assets, while quantitative funds -- those relying on trend-following models instead of fundamental research -- now account for 20% of the market share, according to estimates from J.P. Morgan.
• Passive funds have attracted $39 billion of inflows so far this year, whereas active funds lost a whopping $90 billion in 2019, the bank said.

Traders work on the floor at the New York Stock Exchange, May 23, 2019.

Brendan McDermid | Reuters

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.

DoubleLine Capital CEO Jeffrey Gundlach has taken a shot at passive investing, saying it is causing widespread problems in global stock markets. He called it a “herding behavior.”