Traders work at the stock exchange in Frankfurt, Germany, on Jan. 22. (Reuters)

Capitalism has always been an epic struggle between risk and reward, and the easiest way to understand the present turmoil in world stock markets is to recognize that the two have reversed. Risk has gone up, and reward has come down. Investors have reacted by selling. Fear triumphs over greed. This, of course, increases risk and selling. It’s an old story.

It may also be misleading. Despite the sell-off’s severity (in 2016, U.S. stocks have dropped 7.4 percent and lost $1.8  trillion in value, says Wilshire Associates), many economists doubt it heralds a recession. “Market turmoil [is] not justified by economic reality,” Capital Economics, a consulting firm, told clients. Economists at Nomura, in a January report, rated the chances of a U.S. recession this year at 21 percent. The International Monetary Fund has the U.S. and global economies avoiding a downturn in 2016.

“Consumer fundamentals remain strong,” Nomura says of the United States. “Significant pent-up demand for housing is likely to sustain above-trend growth in residential construction. . . . The banking system is well capitalized.” (This last observation refers to large losses suffered by banks in the Great Recession that caused many of them to cut lending.)

Similarly, China’s outlook is hardly a recession. The IMF forecasts the country’s growth in 2016 at 6.3 percent, which — though much less than recent rates of 10 percent — still exceeds most other countries’. “China’s economy is set to slow, but not collapse,” writes economist Paul Sheard of Standard & Poor’s.

But there is a less reassuring interpretation: The global stock sell-off may reflect gloomy prospects for “emerging-market” economies. These are middle-income countries: China, Brazil, Russia, Mexico, Indonesia, India and the like. Together, they represent nearly half the world economy and, until recently, were expected to power global growth. Now, many (not just China) are struggling with stubborn problems. With hindsight, their previous rapid growth depended heavily on a fleeting commodities boom and unsustainable borrowing.

If this theory is correct, then the worldwide sell-off of stocks represents a logical response to reduced economic prospects. (In theory at least, stock prices reflect today’s value of future profits.) Unfortunately, two bits of evidence support this theory.

One is oil. Since mid-2014, its price has dived from more than $100 a barrel to about $30. Traditionally, lower prices have been seen as a boon. Consumers’ savings at the pump can bolster other spending. But this time, lower prices are also blamed for spreading distress and dragging stock markets down. Why is this?

Part of the explanation is that prices are so low that dozens of new exploration and development projects were rendered uneconomic. Oil companies have canceled $1.6 trillion worth of projects through 2019, estimates the consulting company IHS. The loss of these projects (and jobs) represents a drag on the global economy and, to some extent, justifies lower stock prices. But that may not be the end of the story.

“Oil is a symptom,” says Roger Diwan of IHS. It’s a symptom of disappointing emerging-market economies. Low oil prices don’t just reflect oversupply. They also result from soft demand. Because increased demand comes heavily from emerging-market nations, they may be weaker than assumed. Oil may be the canary in the mine.

The other bit of evidence involves “capital flows” — movements of money in and out of countries. For years, emerging-market countries attracted billions of inflows, based on appealing profit opportunities. But in 2014 and 2015, emerging-market countries experienced $846 billion of net outflows, estimates the Institute of International Finance (IIF), an industry group. This capital flight has many complex causes, but one is worry over emerging markets’ “growth performance and corporate indebtedness,” says the IIF.

Investors are fleeing emerging-market stocks and bonds for fear that stocks will fall and bonds won’t be repaid. Already, their stocks are depressed. From previous peaks, stocks are down about 80 percent in Brazil and Russia, 50 percent in China and 40 percent in India and Mexico, according to data from the IIF.

None of this is conclusive. It may be (as many economists believe) that the global stock sell-off is just another instance of irrational herd behavior, disconnected from satisfactory — though not spectacular — economic performance around the world. But there is a reasonable case that the sell-off is the market’s way of downgrading the prospects for emerging markets and reducing expectations of future growth.

When the stock market goes down, people saving for retirement are quick to worry about their investments. Here's why 401ks and IRAs are better left alone. (Jayne Orenstein,Daron Taylor/The Washington Post)

The stock slump could be self-fulfilling. The Great Recession was a traumatizing event. Because it was so deep and unexpected, it made both consumers and business managers more risk-averse. With risks now rising and rewards falling, firms and households might cut their spending just a bit — and cause the very slump they’re trying to avoid.

Read more from Robert Samuelson’s archive.