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The Global Impacts of Chinese Troubles

April 18, 2016

The Chinese stock market is headed south. Our early 2016 drop was related to China, but we’ve rallied to recover since. The same can’t be said for China’s problems.


Early 2016 forecasts for China indicated a 12.5 percent decline was in store. But the actual data from the beginning of this year shows decreases of more than 25 percent!


In that context, it’s not surprising that China’s industrial output has slowed to its lowest levels since late 2008. The low production levels mean the country’s export machine isn’t being fed, and given the breadth of Chinese exports, effects are being felt in some of the world’s largest economies.


Where is this happening? Brazil, Canada, Germany, France, Japan and the U.S. have all experienced 20 percent or more drops in Chinese goods. Those countries being hit that hard is a telling sign of our global economy!


Fears persist that the U.S. market is headed for a similar downward plunge. Our domestic market is the most expensive it’s been, according to its price/earnings-to-growth ratio (PEG ratio). Is it overvalued and perhaps ready to decline? Nobody knows the answer.


However, one thing is for sure – traders today seem to focus on the words of Janet Yellen and Mario Draghi more than firms’ revenues, balance sheets and profits.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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