What if you had a genie in a bottle?
Some $25 trillion of assets do. It’s Blackrock’s Aladdin risk management system. It was nearly $22 trillion a year ago.
So I peg it to $25 trillion by looking at the money flowing to Exchange Traded Funds. I don’t know the Aladdin plan for managing risk in tokens but you can be sure there’s one because it turns on the same foundational principle.
Stocks are collateral.
Let me explain. It’s a crucial concept for both public companies whose shares are traded in markets and the investors sizing them up as investments.
Why does money shift to Healthcare, Consumer Staples, Utilities, when Technology falters?
Tim, it’s safety.
Oh, I agree. But that’s not fundamental.
Earnings in those stocks don’t improve because Tech stumbles. It’s how they trade.
Let me rephrase: It’s the predictability of prices. And sure, income over growth. More on that in a bit.
Aladdin runs some 15 MILLION portfolios nightly, stress-testing on the intravenous flow of gargantuan quantities of financial data. And it makes adjustments.
The same banks that execute trades, back swaps, run rebalances and transitions for portfolios – I just rebalanced some of my own long-term portfolios – are using Aladdin.
Well, what’s the probability of a lockstep march in that ecosystem?
At Market Structure EDGE, our decision-support platform for investors (corporates can use it too and do), HAS landed in our Momentum portfolio. Like Aladdin, this model portfolio has a lot of inputs. It’s hard for a stock to make the cut.
And there are only ten right now, a sign of risk. But it’s got IBM (reporting today), ADBE, INTU, RBLX, ADBE, UNH, BOX, EBAY, HAS, BJ.
Talk about a motley crew – in the sense that you’d say looking at the group, “Who called this meeting?”
Software, not AI? Hasbro? You’d expect UNH because money moves to Healthcare when Tech falters.
I submit it’s because volatility is suppressed in these stocks.
Proof? In the last 20 days, UNH is up about 13%. In our Market Structure Scorecard (which we’ll officially launch at IR Impact in New York next month, so come join), UNH is dead in line with the S&P 500 for volatility but in the 93rd percentile for volume from PASSIVE flows.
Follow the money (we do that nearly in realtime).
Meanwhile, TSLA and SPCX are exploring a combination. Long ago, the head of investor relations at UnitedHealth Group mused to me, “One day we’ll have one giant ETF holding one giant company.”
He’s since retired. He’d say of a TSLA/SPCX combo, “I told you so!”
I said at the outset that stocks are collateral. ETFs don’t pick stocks. They issue shares against collateral called “equities.”
It’s how HAS lands in our Momentum fund. About 9% of its volume is Active Investment. But it’s in the 94th percentile versus the SPX for derivatives. Options conclude the October reset today.
I can unfold a thesis. Aladdin is behind it.
The same banks making markets – running grocery stores, let’s call it – in equities are using Aladdin. Could it lead the same firms to build derivatives positions in stocks like HAS so that it shoots up as new options trade?
HAS is up nearly 27% the past 20 days. Almost half that came on results. Which paradoxically means it’s now out of the basket for the next two quarters.
That’ll cause standard deviation errors in portfolios and lead to rebalancing.
It happened to Ford in May when that stock (F) rose 13%. We watched Passives sell it after that.
It’s a key reason why we advocate a disciplined strategy for reporting information to the market. If you want to know more, ask us.
If the news is great, why would the stock subsequently decline? Because it’s not “good news” that causes stocks to rise or fall. It’s ETFs and risk management – because ETFs own collateral, and risk management systems tell them WHAT to buy or sell.
GM reported strong results and a big boost to its buyback, which could consume another third of its shares outstanding. The stock declined. It’s not in the risk-management calculation.
I run a static portfolio at EDGE called the Safety Portfolio. It’s a sensor telling me when money goes to that group. I’m sure much like Aladdin. It holds: JNJ, MMM, LIN, AZN, NVS, V, KO.
Sentiment (Demand) in the group is 7.3.
There’s a vital lesson for public companies. If you approach the market as though the buyer is a rational being, you will be run over by the genie in the bottle.
Adapt. We’ll help you.
What might we expect from a market where Aladdin has executed a long shift from AI? Supposing it did so?
Broad Sentiment right now – our quantitative meter of Demand for stocks – is 6.2. The red line is 6.0. It hit 6.8 twice in the past year, in April and back in December 2025. Those were late-cycle events. I’d say the rebalance is concluding. And we COULD hit 6.8 here too.
It COULD mean money has shifted from growth to income.
And public companies reporting earnings, you should be leveraging that fact. Deliver the product that the market is buying. Value.
I expect a consequence. Aladdin aims to tiptoe elephants across putting greens. It’s hard to do. Somebody will trip over a cord, unplug a machine. Something will go haywire.
So grab hold.
