ETF Prism Report: ETF Bubbles: Separating Fact From Fiction

With US markets at all-time highs, many investors wonder if the massive growth of ETFs are perpetuating a bubble.

With US markets at all-time highs, many investors wonder if the massive growth of ETFs are perpetuating a bubble.

Our quantitive research tools suggest ETFs are not currently creating a bubble in in broad based market indexes like the S&P 500. However, we do believe ETFs can cause two types of bubbles:

  • Short-term bubbles in sub-sectors or niches like REITs
  • Long-term bubbles in corporate governance and environmental/social impact through proxy voting

Our key take aways:

  • Know what your ETF owns, and how is it being influenced by other ETFs
  • Understand the proxy voting policies of the ETF sponsor