The Gray Swan

Grey swan is a term used to describe a potentially very significant event that is considered unlikely to happen but still possible. Because there is a slight chance the event will occur it should be anticipated, particularly as it could shake up the world, economy, and the stock market. 

• A grey swan is an event that is possible and known, potentially extremely significant but is considered not very likely to happen.
• They can be positive or negative and significantly alter the way the world operates, which is why we are urged to take them seriously.
• Examples of grey swans include climate change, population growth, and rising debt.

Examples of Grey Swans

Everything from climate change, population growth, and rising debt have been categorized as grey swans. We are aware of their presence, but perhaps do not take them seriously enough, even if each of them could end up having severe, wide-ranging consequences, such as triggering another Great Depression.

Examples include natural disasters, such as Katrina, Britain’s unexpected decision to leave the European Union (EU), otherwise known as Brexit, President Donald Trump winning the U.S. election, or a revolutionary, technological breakthrough, such as the internet.

The outcome of these types of events cannot necessarily be predicted with ease. However, that does not mean that those who stand to be affected should not draw up some form of a plan for how to potentially handle them, regardless of how improbable they might seem.

Top 5 Most Market Moving Grey Swans to Watch for 2020 by John Kicklighter: 

• S&P 500 FINALLY ENTERS LASTING REVERSAL (50%)
• NO DEAL BREXIT AT END OF TRANSITION PERIOD (50%)
• PRESIDENT TRUMP WINS RE-ELECTION (50%)
• US-CHINA END TRADE WAR AS US-EU ESCALATES (30%)
• MAJOR CENTRAL BANKS CHANGE THEIR STANDARD POLICY MIX (25%)
  
  

Source: Investopedia