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In the Correction Camp

By Matthew Kerkhoff

 

This correction has been puzzling, to say the least, and I find myself endlessly deliberating whether this is an emotional correction, or as some other analysts have put it: GFC 2.0.

 

At the moment, based on the information available to me, I find myself heavily favoring the correction camp.

 

Among the many factors contributing to the recent decline, China has been front and center. Two developments stand out as catalysts for the global selloff: major declines in the Chinese stock market, and the recent currency devaluation. Neither of these issues appears to have the seriousness to match the response they elicited across the financial markets.

 

First, as described in a previous article, China’s stock market is still in its developmental stages and does not reflect or accurately discount underlying economic conditions. The market is dominated by retail investors (85% according to Reuters), and is much more casino-like in nature than the U.S. ... Log in or subscribe to continue reading.


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