- Russel 2000 is down by 25 % from its 2015 high
- FTSE 100 is down by 19 % from its 2015 high
- Nikkei is down 21 % from its 2015 high
- Shanghai is down 40 % from its 2015 high
- Oil is down by 70 % from its 2014 high
I know they are telling you that low oil prices somehow will result in a recession in the US and in Europe. This does not make any sense as low oil prices are good for most of the global economy including the USA, Western Europe, China, India and Japan. I also know that they are telling you that this is all China´s fault, a country experiencing growth inline with expectations. Furthermore China is not an important export market for the USA which accounts for 5 % - 7 % of the S&P 500 companies revenues.
Corrections and bear markets in equities may occur for no good reason at all, they just happen unexpectedly and violently. If you are not up for annual 10 % corrections, semiannual 20 % bear markets or 30 % or more equity devaluations a couple of times each decade you should not be in stocks. I do not live in Florida anymore, however the stock market is a good alternative to Disneyworld´s wild rides.
Do not panic and do not sell everything. Rebalance and pick up assets as they reach your pricing thresholds. Fun fact: This is the 34th S&P 500 correction since 1950.
GDP and oil price with negative correlation, GDP increases when oil prices are low:
Source: Forbes
Real GDP growth in China, actual vs. consensus forecast:
Source: Tradingeconomics
Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving any compensation for it.
