Market Rationality Got Automated Away and Nobody Noticed

We keep hunting for objective rationality in a market that has become indifferent and deterministic. That's the real issue right now... it isn't exactly news, but it has gotten sharper over the last 20 years as the market shifted from discretionary, value based decisions anchored in fundamentals to one run by passive index funds, algorithmic reactions, and feedback loops (with a sprinkle of active investing from a handful of multi strategy hedge funds still trying to matter).

So what we're seeing play out is simply the consequence of that shift. Some event happens (doesn't really matter what) and it triggers a reactionary feedback loop completely detached from economic or political fundamentals. Short covering kicks off upward pressure, algorithmic CTAs flip and pile onto the buying, and options dealers hedge by scooping up the underlying stock, pushing prices higher still. No rationality required.

That's the part that sticks with me. Narratives and careful reasoning matter less now because rationality was automated away years ago. Over that same stretch, automation came to control roughly 70% of US stock funds, buying and selling off index weights instead of fundamentals. That's how you end up with the Mag 7 making up more than 30% of the S&P 500 with virtually no fundamentals to justify it.