Ari Rubenstein knows it’s an opinion people don’t want to hear. That two decades of computer takeovers on exchanges, advancements that put thousands of people out of work and left high-frequency traders like him in control, are what kept markets humming during the coronavirus.
The co-founder and CEO of electronic market maker GTS, whose own career began in commodities pits at the World Trade Center, is blunt when asked what would have happened had it still been necessary to get an army of floor traders to Lower Manhattan in March and April.
“It would’ve created massive uncertainty and exacerbated the problem tremendously,” says Rubenstein, whose firm sometimes buys and sells a billion shares a day. “If there was ever a question that technology and innovation is the future of Wall Street, we’re seeing that future right now.”
So with Wall Street, so with everything else, it has lately seemed. Right after being saved by the machines, exchanges became the site of investor stampedes to any stock with a claim on automation, particularly giant tech. While that’s been the salvation of bulls as the S&P 500 rallied 27% from its March lows, it’s an escalation provoking concern among people worried about workers and wealth equality in America.
The theme is daily fodder for bullish commentary from research firms. Swelling weightings in tech mean “the S&P 500’s remarkable performance makes sense,” wrote DataTrek Research Tuesday. Goldman Sachs repeated the often-heard observation that Facebook, Apple, Amazon, Microsoft, and Google make up 20% of the index, the highest for any five members in more than 30 years.
But the pandemic has clearly also made it easier for haters to frame the market as a place that encourages and celebrates companies whose distinguishing feature is that they remove humans from the process.
“There’s a symbiotic relationship between the market and what corporations are doing,” said Christian Weller, senior fellow at the Center for American Progress and a professor of public policy at the University of Massachusetts, Boston. “Both corporate profits and behavior are anti-worker and boost stock prices.”
That talk will strike some as extreme, but shows how divisive the issue can get. Right now, the Russell 1000 winners list is dotted with systematic names. Amazon.com Inc., whose shares have soared, may be a huge employer, but has displaced many times more workers than it has hired. MarketAxess Holdings Inc., an automated bond trader, is up 38% since the February top, while electronic market maker Virtu Financial Inc. has jumped 41%. Even Netflix Inc., beating the S&P 500 by about 40 percentage points this year, can be viewed as a category killer of sorts when it comes to TV stations and cinemas.
To be sure, businesses reliant on public contact have been casualties of tech innovation for decades, it’s nothing new. And the market isn’t the economy -- though it’s at least a reflection of it, and a bet on what will thrive in the future. Unsurprisingly, amid a crisis bent on keeping everyone at home, bets are coalescing around companies that ease the burden of being locked indoors.
“A lot of the productivity investments that companies made over time have allowed the absorption of this shock of the elimination of a tremendous amount of face-to-face work,” said Joseph Fuller, professor of management practice at Harvard Business School. “The United States over time has continued to deploy technology in ways that allow things like social distancing.”