{"id":971,"date":"2025-05-02T16:42:31","date_gmt":"2025-05-02T16:42:31","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/simonharry\/?p=971"},"modified":"2025-05-02T16:43:53","modified_gmt":"2025-05-02T16:43:53","slug":"rethinking-passive-investing-changing-market","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/simonharry\/2025\/05\/02\/rethinking-passive-investing-changing-market\/","title":{"rendered":"When Trust Breaks Down: Rethinking Passive Investing in a Changing Market"},"content":{"rendered":"

\"Passive
\nI authored this piece as a guest contributor for the financial strategy site, Breaking Bank<\/a>.\u00a0<\/em><\/p>\n

We may be living through one of the most important financial shifts of our lifetime. Amid the visible upheaval in global markets, a quieter and equally significant pivot may also be taking hold\u2014a generational turn from passive to active investing.<\/p>\n

Since the turn of the millennium, global capital markets have been powered forward by two complementary forces: trust and passive investing. It was trust in the United States as a safe, stable steward of the global economy. Trust that markets are rational and fair. And trust that the simplest, most reliable way to grow your money is to invest in a diversified passive index fund.<\/p>\n

But that era may be over.<\/p>\n

The Trade War That Shook Global Markets<\/strong><\/p>\n

A new trade war, sparked by the United States, has begun to change the financial landscape in ways that are hard to overstate. In the eyes of many global investors, trust in the U.S. has been broken, perhaps permanently. And when it comes to financial markets, trust isn\u2019t just important. It\u2019s everything.<\/p>\n

Without trust, markets seize up. Confidence fades. And most importantly: money moves.<\/p>\n

Large pools of capital such as pensions, sovereign wealth funds, and global institutions are beginning to rethink their exposure to U.S. assets. That means we could be at the beginning of a prolonged and consistent outflow of capital from American markets. In plain terms: foreign money may start leaving.<\/p>\n

Why That Matters More to Markets Than You Think<\/strong><\/p>\n

In today\u2019s world, most money isn\u2019t managed by stock-picking experts anymore. Instead, most of the money is managed by index funds. Index funds are passive investments, and they don\u2019t ask questions about where money should go. Their only job is to track a set list of stocks, often indexes like the TSX 60 or the S&P 500.<\/p>\n

The idea behind passive investing is that it\u2019s cheap, simple, and reliable over the long run. But here\u2019s the catch: all the purchases and sales are done irrespective of price.\u00a0 When money enters or leaves passive funds, it doesn\u2019t discriminate. There is no thought behind transactions. Passive funds don\u2019t sell the bad stuff and keep the good stuff. Passive funds just sell. Or they just buy.<\/p>\n

And here\u2019s what happens as a result:<\/p>\n