The International Monetary Fund (IMF), a world body that helps to keep the global economy stable, released a major report on Tuesday that projected the world’s economy will grow by 3.7 percent, which is 0.2 points lower than they had estimated in April. Want to see how polarized America is? Last month, multiple sources told me Trump’s strategy is to cripple China’s economy after years of stealing intellectual property from American companies and challenging US power in the world. It is when this opinion travels deep into the system and becomes generalized that the system ends up in a crash. It’s not the most likely scenario. It’s in our nature: As the proverb goes, “tell me a fact, and I'll learn; tell me a truth, and I’ll believe; but tell me a story and it will live in my heart forever.” We are attracted to story-telling, and when it comes to investing we seem to be searching for the most compelling narratives about the unknowable future, regardless of how accurate they turn out to be. Vietnam is next. But some foreign economies — particularly so-called emerging markets — are struggling on their own. But it seems safe to assume that traditional investment approaches will continue to do little to protect investors from catastrophes that keep showing up from time to time. Yes, very likely, because several market indicators flashing red. This is why. The U.S. stock market is in an amazing shape. For each “hunch” that is successful, a myriad others fail. To be sure, we have made progress on many fronts. I build and manage portfolios for a broad spectrum of clients at Path Financial LLC, and I focus on addressing risk. Brazil is also in economic turmoil, and it’s unclear if Jair Bolsonaro, a Trump-like figure and the frontrunner in the country’s presidential elections, can turn it around. It may be the same with a stock market crash. This is a remarkable passage because it resembles closely what one would read in an opinion-based analysis of a market event. While occasionally somebody may seem to be on the right side of an investment ahead of a big move, this is a far cry from actually forecasting such move with any kind of precision in terms of timing and size. “There’s a herd behavior.”. Whether Professor Sornette is right or not that a critical point can be anticipated, the entire concept of market self-organization deals a blow to the “fundamental” approach to investing in equity markets – the idea that opinion-based research can lead to investment success when it seems quite apparent that outcomes cannot be predicted even when initial conditions are known. It’s possible the US market will bounce back. A stock market simulation that resembles actual returns, complete with "fat tail" distributions and... [+] occasional market crashes. © 2020 Forbes Media LLC. The title was "Self-Organized Criticality" and falls within a branch of mathematics known as Complexity Theory, which studies how systems can organize themselves into unexpected behaviors arising from the interaction of its smallest and seemingly independent components. These are difficult concepts, and it is doubtful that investors will embrace them anytime soon. While this is a radical statement, some investors seem to agree – they have been abandoning active mutual funds for years, while embracing index-tracking ETFs. Or is it? Turkey and Iran, two important Middle Eastern economies, are plunging toward major recessions, at least in part because Trump placed sanctions on both countries this year. One of the best illustrations of the trouble with “fundamental” analysis appears in the book Ubiquity by Mark Buchanan (another physicist interested in complexity theory). This does not mean that successful investing is impossible; only that the more we learn about market behavior, the more it seems that trying to deal with uncertainty is more important than pretending that we can have any certainty. In retrospect, there is nothing surprising. Why North and South Dakota are suffering the worst Covid-19 epidemics in the US. A truly “chaotic” market is one where everyone is doing something different, interactions offset each other and price volatility remains low. This triggered a small avalanche, as a few grains toppled downhill toward the East. Here’s why. As the pile grows, little avalanches take place that are impossible to predict but... [+] resemble the way stock markets decline. Some became quite intrigued by what happens to a sandpile as it grows. The paradox here is that a crash is often (and mistakenly) characterized as “market chaos.” In fact, it is the opposite: a crash reflects a highly ordered market, when everyone does the same thing (i.e. Markets are skittish, and they react pretty negatively to bad news. It does this mostly to curb inflation, which can rise during high-borrowing periods, so the price of everything doesn’t skyrocket. For a bubble to form, price gains have to accelerate at a “super-exponential” rate. Mark Zuckerberg, Facebook’s chief, already testified in front of Congress to answer for some of his company’s woes, and it’s possible future legislation will regulate what Facebook can and can’t do. Plus, market psychology is such that when a few people start selling off their assets in a panic, others do as well. The US-China spat will likely negatively affect global markets for a long time.