There are 2 big problems with blaming China for the stock market sell-off
There's been chaos in global markets.
Stocks fell more than 3% in the US on Monday, a decline that followed a 3% sell-off to end last week.But on Tuesday morning, stocks were ripping higher, a move being largely attributed to the People's Bank of China's decision to cut rates.
"I have two problems with the ongoing global stock market sell-off," Sløk wrote.Sløk added:
1) Betting against China has been a losing proposition for decades, why should now be different?2) Despite this being a client conversation for several months, I still haven't seen a smoking gun chart showing why a slowdown in China will have a significant impact on the US expansion. If you have one then please send it along.Sløk included the following chart, showing spikes in the VVIX - which measures volatility of the VIX index, which measures expected volatility in the stock market - during the Lehman event of 2008 and the Greece crisis of 2011, among other big events.
Is this really the same sort of problem?
Not to Sløk, who writes: "As a result, I conclude the following: When uncertainty about corporate America reaches an all-time high - see chart below - because of "something in China" then it looks like a buying opportunity to me; wait for your 5-day moving average to stabilize and it will likely be a good entry point."
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