One of the reasons why I believe this bull market of the past year is fragile outside of the Fed’s loose monetary policy is the amount of gimmicks I see at play – crypto currencies (where is the inherent value?), NFTs and SPACs to name several. One gimmick category we have yet to cover in these pages is the flavor-of-the-month ETF.
This WSJ article recently highlighted momentum ETFs actively managed by artificial intelligence. When I hear the word “momentum” in a capital markets context, I immediately think of words and phrases such as “short-term”, “trading”, “high transaction costs” and “losses”. Apparently the algorithms that power these actively managed ETFs are trading “meme” stocks (AMC, GameStop and the like) in the pursuit of short-term gains. This is another example of a gimmicky product that helps create the narrative that the equity market with its present nosebleed valuations is a giant game of musical chairs. If you wish to learn more about AI-powered momentum ETFs, Qraft AI is one such provider.