I don’t play stock anymore, because I’m suck at it. United States’ stock market plunged a thousand points, more or less, since last Friday and this Monday, and the whole market looks incredibly shaky now. Nonetheless, I remembered how we complained the market was so unregulated in 2008 or so in which contributed to subprime crisis that spilled into the whole market, but now we are complaining that the market is being controlled by China which may contribute to the plunging of stock markets around the world. I’m wondering, which method is the correct method to let the market runs wild?
If you have followed the news, China’s stock market has been hammered very badly by selling, and so people suggest that the fear in China’s stock market has spread to the United States and elsewhere. This certainly has some truth, I think. After all, if people invest in China as the stock market there is plunging, it’s understandable that they may sell in the United States to recover some physical assets such as Dollar. Nonetheless, this may not be true since nobody would know how China’s stock market gone wrong would really affect the United States. It’s curious to me to see China’s stock market is affecting the United States’ stock market too.
There is another argument which proposes that China’s Yuan devaluation contributes to the stock market plunge in the United States, because United States’ corporations and companies would be less competitive in China, elsewhere, and at home, thus contributing to the selling of shares in the United States’ stock market. Nonetheless, nobody would know how much fear would be driven by Yuan devaluation. Thus, it is curious to me to see people are selling shares in the United States as China devalued Yuan down to 4%, more or less.
Of course, people may think Yuan devaluation would not allow the FED to raise interest rate, and so it would be super bad to see the FED may raise interest rate. I think this may have some effects on how people manage their shares in the United States’ stock market. Nonetheless, the general public isn’t too sure about when the FED would raise interest rate, but the FED had said that they want to raise interest rate. Perhaps I’m missing on reading several news articles or so, because I didn’t see the FED had come out to calm the stock market down in term of relieving the fear of interest rate raising.
The stock markets around the world are evermore interconnected somehow, and I don’t really know how one country’s stock market could affect another, but I guess it’s all about the economic conditions that drive the fears, speculations, and so on. We are living in an interesting decade as not only economic conditions are the fears but we also have around the world, small scale conflicts that may spill into much bigger conflicts kind of fear. Furthermore, we have oil prices which has plunged below $40 per barrel. The near term outlooks of the stock market and world economy are not really that optimistic. I guess we will see more actions coming soon in coming days.