Financial shocks driven by passive index funds that hold pre-defined percentages of different asset types. Let's say you have a diversified passive fund that h

Financial shocks driven by passive index funds that hold pre-defined percentages of different asset types. Let's say you have a diversified passive fund that holds 25% each of asset types A, B, C and D. If asset type A crashes and it's now 10% then B, C, and D will now be 30%. The fund will rebalance and sell B/C/D so they're back to 25% and the values of those asset types will decline. The values of A/B/C/D all correlate with one another even if they are fundamentally unrelated.