Matt Abels

Anyone been paying attention to what’s been going on with China’s stock market? It’s been hard to miss lately, with all the headlines. Here’s just a few from the last week (all the same day):

How China’s stock market bubbled…then burst
Bets Rise That China’s Yuan Will Fall
Chinese stocks end lower after wild swings
Why we should let China’s bubble burst
Why China won’t trip up U.S. earnings
Why you should worry about China’s stock rout

My head hurts! The best part about the last three headlines is that they came from the same website and they were all listed next to each other. So, I guess we can pick which one we want to believe.

There is no doubt that China is currently having some issues, but the headlines and the numbers don’t tell the entire story. Most of the headlines recently have focused on the fact that the Shanghai Composite Index is down over 25% since the middle of June and that it was down 8% in one day last week. Did you know that despite all that, the Shanghai Composite Index is still up 75% over the last 12 months?

I’m not trying to minimize what is going on in China. The Chinese economy will likely face its challenges in the months and years ahead, and that could have an impact on the U.S. and world economy…or it might not. Even if we knew that it would have an impact, could we quantify the impact and time our investments correctly? History tells us that most people are not able to predict or time the market with any degree of consistency.

A key part of having a successful investment experience is focusing on what you can control. What we know is that we can’t control what is going on in China and how the market will react in the short term. What we can control is how we react, or don’t, to all the noise. What the market has proven over the years is that for those who are patient and stay invested, it has rewarded investors. Overreacting to the latest news generally provides a poor investment experience. My best advice is to stay invested, stay diversified…and turn on some ESPN.


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