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New Year, New Problems

January 6th, 2016

Its not how you start but how you finish, however that philosophy did not hold well for the start of the 2016 stock market. In fact, this year has been predicted to be the worst year for stocks since 1931.


This was seen immediately in the Chinese market, which ended mainland trading before the end of the day due to drastic slides across the board, especially in the industrial and entertainment sectors. The U.S. market experienced downward trends as well but not nearly to the magnitude of China’s. However there is opportunity in this downhill market if you look in the right places.

To understand if and how the crash of the Chinese market will affect you, we must first understand why it happened. This situation arose from a multitude of factors. The countries weakening currency combined with poor surveys of the domestic factory activity scared investors away from the world’s second largest economy, causing a massive sell off and an average decline of seven percent, before the day was even over. Basically China’s problems stemmed from internal matters. Although this is not directly negative for the U.S. market, it is definitely scaring investors here as well.

U.S. markets started trending downward before the week even started. When the market opened yesterday there were widespread but not severe losses. Bond markets are lower than usual, minus a small increase in municipal bonds. The high yield bonds are down a drastic twelve percent. What this can tell you is that betting against the junk bond market would most likely be the smartest move in this section of the market. There was still gain amongst a day of loss with natural gas experiencing a twelve percent increase. This is due to crude oil being down a drastic forty-six percent. Not to mention the global advancement towards more clean energy. These trends would suggest that the wise move would be to bet against the Chinese and Emerging markets, and to favor the U.S. market.

Overall, it’s important to stay conservative in this time considering the volatility of markets around the world. The big concern is whether or not China is going to pull the U.S. market down with it, and if so, how far. This is however all the more reason to stay conservative with your assets and avoid the red flags. To ensure that you and your money is safe from this financial flu, call David Ortiz, your registered I.A.R. today.