One lesson from years of monitoring market sentiment and psychology is that they hate nothing more than uncertainty. Unfortunately, the problems befalling the Chinese economy have got the markets hot and bothered.
The recent currency devaluation, and a plethora of weak numbers out of that economy, are doing nothing to quell nervousness.
In the year to date, the US Dow Jones Industrial Average has lost 7.9%; the S&P 500 has lost 4.9% and the FTSE 100 has lost 5.1%.
In contrast, the German DAX is up by 5.1% and the French CAC by just over 9%.
However, all markets are now well off the highs of earlier in the year and in August experienced their worst month in three years.
European markets are somewhat less concerned about what is going on in China, presumably because the US has a much greater trade exposure to China than does Europe.
However, if the US economy were to be hit hard by a sharp Chinese slowdown, then Europe would inevitably suffer.
We are all in this together, a fact that has been strengthened by globalisation.
The problems in the Chinese economy, which were highlighted again this week, poor trade numbers that saw August imports down by 13.8% and exports down by 5.5%, are having a profound ripple effect throughout the global economy.
For example, South Korean exports and Australian growth have weakened considerably, as a result of the Chinese slowdown.
It is clear that we are all in this together.
Up until the end of the last decade, China was delivering double-digit growth rates consistently, but the Great Recession of 2007 has taken its toll on that economy’s strong growth profile.
Some believe that the sub-prime-induced, developed-world recession has run its course, but it is still reverberating.
The boom in the Chinese economy was driven by strong inward investment and a very buoyant export performance.
With the slowdown in the economies of the developed world, in particular, investment into China has slowed and its ability to sell overseas has been damaged.
Hence, the marked slowdown in activity and the recent devaluation of the Yuan.
While these Chinese problems are having a marked effect on global equity markets, the problems are also being felt in commodity markets.
Over the past year, global commodity prices, on average, have declined by 21%, with oil prices down by 51%, metals down by almost 28%, and food down by 18%.
In response to the Chinese boom, there was massive investment in the production of many raw materials.
Alas, with the sharp slowdown in Chinese demand and heavy over-supply, as a result of past investment, commodity prices have weakened considerably.
For those invested in commodity funds, these are not good times.
While it is difficult to be too precise about what is going on in China, it is clear that weaker investment and exports are having a significant impact on the economy, and domestic demand is nowhere near strong enough to take up the slack.
The Chinese authorities are seeking to switch the bias of growth away from debt-driven investment and exports and towards stronger domestic demand.
It is proving a slow and laborious process and one that will not be helped by the current pressure on exports and investment.
Looking ahead, it appears certain that activity will weaken further and equity markets will remain on a high state of alert.
They are worried about a premature tightening of monetary policy in the US, but it is likely that this fear will not materialise.
The US authorities have to be mindful of the monetary policy mistakes made in 1936, the last time the global economy experienced problems of the magnitude that policymakers are still grappling with today.
Equity market investors may need a strong nerve over the coming months, because, until we see a reversal of the Chinese slowdown, markets are likely to remain nervous and jittery and very news-driven from day to day.
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