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Reflexive Selling Driven by ETFs & Fund Outflows

  • MichaelMedici
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2 years 3 months ago #1 by MichaelMedici
I'm a huge proponent of George Soros Theory of Reflexivity and have applied it to many aspects of my life including Investment Positions, Fitness and Confidence.

One interesting thought I have regarding a potential sell-off is that Reflexivity could seriously increase the magnitude, creating a self-sustaining chain of selling that look something like this.

Market Sells Off --> Stock Prices Decline --> ETFs forced to sell to match --> Stock Prices Decline --> Market Sell Off Increases --> Stock Prices Decline --> ETFs forced to sell. and so on.

or

Market Sells Off --> Stock Prices Decline --> Fund Withdrawls --> Forced selling --> Stock Prices Decline --> Market Sell Off Increases --> Stock Prices Decline --> Fund Withdrawls --> Forced selling --> Stock Prices Decline

Personally, given the large amount of money sloshing around in ETFs and Funds, I think an event like this has the potential to create the next "Black Swan" event.

Anyone have any thoughts on the matter?

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