In today’s Steady Investor, we look at key factors that we believe are currently impacting the market and what could be next for the markets such as:
How a Property Developer in China Rattled Global Markets – China’s red hot real estate market has been juiced over the years by billions of dollars in borrowed money. At the center of the real estate boom is the massive property developer named Evergrande, which few investors knew at the start of the week but now virtually everyone is aware of. Evergrande borrowed and built at a furious pace, amassing some $89 billion in outstanding debt by the end of June. Selling apartment units became so popular in Chinese society that flyers to buy homes were passed out at stoplights and real estate agents set up kiosks on the street. Perhaps aware of the deleterious effects of a housing bubble (U.S., 2005-2009), the Chinese government has been tightening the spigot and reining in debt and lending practices, which has stunted Evergrande’s cash flow and has the company at the brink of bankruptcy. 42% of the $89 billion in outstanding debt is due within the next year. News that Evergrande was on the brink sent markets into a tizzy on Monday, and the jury is still out on whether the company will survive and whether China’s real estate bubble will burst. Many on the street believe China’s government will ultimately intervene, but the greater concern is the state’s high-profile crackdown on the private sector. Numerous regulatory actions are signaling China’s increasingly heavy-handed approach to business.1
____________________________________________________________________________
Tips On How to Survive this Market’s Extreme Volatility
Bull or Bear market? This last year, we’ve witnessed the stock market plunge just to bounce back up. But now, some investors are worried another bear market is around the corner. What can you do to stay on top of your investments during these turbulent times?
To help you understand market downturns and steps you can take to protect your assets during the next bear market, you’re invited to get our free guide – Everything You Need to Know About Bear Markets.2
If you have $500,000 or more to invest, get this helpful guide today. It walks through the history and types of bear markets, how investors typically react to extreme volatility, and what we can learn from the history of bear markets and pandemics.
Download – Everything You Need to Know About Bear Markets2
____________________________________________________________________________
An Ominous Trend to Watch This Winter – Natural gas prices have been ticking sharply higher over the last several weeks, more than doubling from levels just six months ago. In September alone, natural gas prices have soared over 15%, which sends an ominous signal heading into the winter months. Generally speaking, natural gas prices do not increase with such magnitude before the cold weather season. The last time natural gas prices rose so quickly, it was prompted by the blizzards that froze the Northeast early in 2014. Analysts believe the increases to date may be a sign that gas prices could move even higher still as cold weather arrives, which could mean more expensive heating bills for households and rising energy costs for large corporations.3
Cargo Ships Remain Jammed in Ports – Before the pandemic, it would have been rare for more than one or two ships to be waiting at the ports of Los Angeles and Long Beach to unload. But as of last Sunday, there were over 70 ships waiting off the jammed ports, which is more than double the amount there were just one month ago. We have written several times that supply chain disruptions have taken many forms, from factory closures in Southeast Asia to raw good shortages across the world. Cargo ships jammed up at ports are an additional factor roiling supply chains.4
The Fed’s 2-Day Policy Meeting Signals a Slightly More Hawkish Outlook – As expected, the Federal Reserve did not make any changes to the policy in this week’s two-day policy meeting, but they did set the stage to the possibility of trimming bond purchases beginning at the November 2-3 meeting. The Fed’s $120 billion in monthly asset purchases has arguably kept long-term interest rates low, providing a tailwind to the strong housing market but also holding down the long end of the yield curve. As inflation concerns spread across all facets of the global economy, the Fed appears to be positioning for the possibility of raising rates as early as next year. Half of the 18 participants in the two-day meeting expected to raise rates by the end of 2022.5
Prepare for Market Downturns – We’ve all witnessed how quickly the stock market can change. That’s why it is important for investors to understand how bear and bull markets work.
To give insight into market downturns and steps you can take to protect your assets during the next bear market, you’re invited to get our free guide – Everything You Need to Know About Bear Markets.6
If you have $500,000 or more to invest, get this helpful guide today. It walks through the history and types of bear markets, how investors typically react to extreme volatility, and what we can learn from the history of bear markets and pandemics.
Disclosure