The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails

Fear Gray Swans

The market is impacted by more than just what occurs within its own confines. The market reflects the world.

Demographics shifts also may contribute to volatility spikes that will roil the stock market. By 2050, the world’s population is expected to grow by two billion people. The total population is expected to exceed nine billion. By some measures, about one billion working-age adults will join the workforce. The number of people older than 60 will grow by 1.25 billion. The number of people younger than 25 is projected to remain stagnant at about three billion, according to the United Nations. Some fear that this could prompt countries to default on their debt payments as older voters are expected to vote to protect government-sponsored benefits, including health and retirement funds. European nations with generous social benefits experienced rioting when financial problems prompted them to consider austerity measures to save money. In 2010 and 2011, France erupted in riots as the Senate prepared to meet to raise the retirement age to 62 from 60. The United States faces similar challenges. Social Security, which accounts for a substantial portion of retirement income, may run out of money, according to various calculations. This could create considerable political pressure on the U.S. government.

Europe’s difficulties balancing budgets in 2011 and 2012 show that such news causes stocks to decline and volatility to increase. For months, Europe’s financial problems ...