Investors may not be able to control their emotions, but they can control how they invest. For risk averse investors, selecting a model with lower volatility is a prudent decision. A risk averse investor is more likely to tolerate small losses and stay invested long-term with lower volatility portfolio
The US economy has a structural wage stagnation. For the last 34 years, wages have been growing at the effective real annual rate of 0.51%. Consumers who rely on salary alone, cannot increase discretionary spending too much. As discretionary spending declines, economic growth will slow down. This creates a risk for the next economic recession.
Passively managed funds can have a similar effect on the economy as systemically important financial institutions