Equity Valuations Hit Historic Extremes as Passive Investing Reshapes Markets

Equity Valuations Hit Historic Extremes as Passive Investing Reshapes Markets
U.S. households now hold a larger share of financial assets in equities than any previous peak, including the 1999 dot-com bubble. Meanwhile, passive investment vehicles control nearly 60 percent of U.S. equity fund assets, up dramatically from just 6 percent in 1996. This structural shift has fundamentally altered price discovery mechanisms. Geopolitical tensions in the Middle East are escalating with Iran effectively closing the Strait of Hormuz and destroying oil tankers, yet markets remain surprisingly resilient. Oil prices face supply constraints at critical chokepoints in petrochemicals, aviation, and fertilizer sectors that cannot be easily rerouted.