The recent volatility in the global markets has a lot to do with the world’s second biggest economy: China.
Recent Chinese Purchasing Manager surveys have come in under 50%, suggesting slowing conditions in the industrial part of the economy.
Most economic numbers out of China are not considered to be reliable, but this one is in my opinion.
Jittery Markets
Yet the broad sell-off in global markets has also been overdone in my view.
I do not think that US utility companies, domestic regional banks and telephone companies are going to be highly affected by developments out of China.
It appears that in recent weeks the selling has been indiscriminate and panicky.
Tame Treasuries
Lastly, if investors were convinced of an imminent economic decline in the US, you would likely see both a selloff in equities and a meaningful shift to long-term Treasuries.
A relatively slight decline in the 10-year Treasury rate from 2.20% to 2.17% does not suggest a confirmation of equity market sentiments.
Buying Opportunities
I believe opportunities are being created but emotions may be the name of the game for a while.
Obviously there will be more economic numbers over time that may provide insight.
I look forward to the next earnings season in October and management commentaries that tell of actual experiences in the business world.
I am pretty sure we will get confirmation of some of today’s worries from such companies.
Yet here is also a chance that such worries may be overly discounted into the market.
Photo Credit: Ken Teegardin via Flickr Creative Commons
