Jeffrey Kleintop, the Chief Global Investment Strategist at Schwab, created this wonderful chart (below) showing the various sources of global market turmoil.
He hints at something very interesting, writing: “Shocks to the global system happen all the time. Many of these shocks are absorbed by the system without much disruption.”
Why them do some shocks lead to global economic crises and others are simply absorbed? Kleintop suggests that a shock turns into a crisis when the system is unprepared for it; I am less convinced that is the key.
I tend more towards the position of Laksman Achuthan of ECRI, who has said that strong economies shrug off shocks, while weak ones stumble. This seems to make more intuitive sense and squares with my experience versus the squishier “surprise” thesis.
Regardless, the chart is very insightful: