The China Syndrome

Aug 14, 2015 | Wealth Management

With all the intrigue of the 1979 melodrama, the 2015 China Syndrome has less to do with a nuclear power plant and more to do with global markets avoiding another type of “meltdown”.   Just when we put Greece in the rear view mirror, China raced down the straightaway and decided to lead a few laps.  Earlier this week, the People’s Bank of China decided to devalue the yuan.  China is the world’s second largest economy and this move provided more negative sentiment towards any quick recovery for their ailing economy and increased fears of a currency war.  The dollar rallied on the news placing more pressure on US multinational corporations dependent on revenue from overseas.  All this combined to send domestic markets lower for the week.  The majority of US companies reporting so far this cycle have exceeded expectations on earnings, however, only about half have reported sales above expectations.  Recent employment numbers met expectations but still growing slowly, and yesterday’s positive retail sales numbers report may add further support to a Fed rate increase in September.   All of these factors, along with the glut of oil continuing  to push crude prices lower, has resulted in the additional anxiety and uncertainty in the markets we have been experiencing .  Whew….now it’s time to take a deep breath.  It’s important to remember that corrections like this are normal throughout any market cycle and it’s vital to stay committed to your investment process.  We remain confident in the US economy’s ability to continue to grow and shake off this current wave of anxiety. 

 

Relax, don’t panic, and have a great day!

 

Jeff

Jeff Schriefer
Vice-President
Senior Wealth Advisor
Wealth Management
jschriefer@bankofthebluegrass.com
859-233-8929 Office
859-252-0304 Fax
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