Many economists around the country think the stock market selloff is not going to create a global crisis. Christian Broda, the managing director of Duquesne Capital Management, is an expert investor as well as an economics professor. Broda spends a lot of time studying China’s economy. And he thinks the Chinese government will stop their internal financial crisis one way or another. Broda and other economists know that the Chinese are not going to allow their stock market to crash even though it has lost 38 percent of its value over a three month period.
Global indexes have lost about 10 percent recently, but there is little chance that the U.S. Stock market will follow the China stock market drop, according to Broda and other economists. Several economists think this sudden selloff is just a touch of volatility in a long-term upward trend. Broda is quick to say that China is an account surplus country which means commodities are excluded, so the Chinese slowdown will hurt commodity exporters more than the economies of other countries. Economists in China say other countries are using their situation as an excuse because they feel their actions are not the reason for the drop in stock prices around the world.
Downward spikes in the stock market are not uncommon, and those spikes don’t usually signal a major downturn, but they can, according to some economists. The big question is, did China cause the stock meltdown or is the market drop a normal market adjustment? The answer is a little of both, according to Broda and other economists. China is in the process of stabilizing its currency and trying to boost their manufacturing base. Those issues can’t be solved overnight, but they will be solved by the Chinese government because their form of capitalism is authoritative.
Some investors say now is the time to buy stocks. The risk reward factor is favorable according to the Relative Strength Indicator. But not every investor is convinces that now is time to buy stocks. Investors are looking at real estate and other investments in the short term, and that may be a good idea for investors that think the economists are not always right.