Every year poses new threats and new opportunities to asset markets. I’ve written extensively about the opportunities and presented my bull thesis to you all. While I still stand by my thesis, I believe that everyone should also be aware of the global risks that could shake the market this year - and I think there are many…
I want to outline one of the biggest risks I see on the horizon so that you can be aware of what’s going on and protect your portfolio, if need be. Right now, I think China could be one of the biggest risks to the global market that no one is really talking about right now. Here’s why…
The Paper Tiger
China’s economy is in shambles right now. Despite coming out of multiple years with “zero-COVID” policy shutdowns, their economy has disappointed many estimates of a robust economy getting back online and driving global growth.
This is evident by how Chinese officials are now scrambling to find methods to stimulate the economy.
Chinese Premier Li Qiang went to the World Economic Forum in Davos last week with a mission to present a positive image of the economy and schmooze financial elites: "Investing in the Chinese market is not a risk, but an opportunity." The message fell flat.
China's troubled property market ended last year with the worst declines in new home prices in nearly nine years, despite government efforts to prop up the sector that was once a key driver of the world's second largest economy.
New home prices in December logged their steepest drop since February 2015, while property sales measured by floor area fell 23% in December from a year earlier
The Chinese stock market is up only ~8% cumulatively over the last 5 years and down 11% over the last 12 months.
We’re now seeing Chinese regulators tell investment funds to stop shorting the market.
This week, the People’s Bank of China (PBOC) announced that they will allow banks to hold smaller cash reserves. Cutting the reserve requirement ratio (RRR) by 50 basis points is set to release 1 trillion yuan ($139.8 billion) in long-term capital, the central bank said.
This adds liquidity to the economy and is used to bolster stock prices and stimulate economic activity.
Expect to see more measures in the coming months.
The Multi-Trillion Dollar Elephant In The Room
The current administration has been working to halt China from receiving American semiconductor chips. Biden has imposed a number of rules preventing China from importing high-powered chips from American companies like Nvidia, Intel and others.
We’re essentially cutting off the largest country from the biggest technological trend in the world…AI.
What would this mean for China, a country that is already desperation-mode to save its economy?
In this next premium section, I am going to dive into the topic and bit more and detail how this will affect some of the biggest names on the market right now.
TAP IN…