August 2015 – ECONOMICS – Financial turmoil in China could spread throughout the world, potentially leading to a U.S. stock market crash in 2016. At least, that’s the view of renounced market analyst Marc Faber. America “is essentially the last man standing.” Faber told Maria Bartiromo on Fox Business earlier this week. “I think it will spill over to the U.S.” (Source: Fox Business, August 20, 2015.) Despite the country’s recent central bank decision to devalue the yuan, crashes in the Chinese stock market seem to be endless. The country’s major indices—the Shanghai and Shenzhen markets—have declined more than 30% over the last six weeks. With that, investors have been expressing their concern that a weak currency and slowing economy could spur capital outflows. “We don’t know exactly why China began to weaken its currency. It could be because of massive capital outflows,” Faber explained.
“It could also be a warning signal to the world that if the world, notably the U.S., doesn’t treat China fairly—and they have some reasons to believe that certainly from their perspective, that they also can embark on economic and financial warfare.” It is repeatedly mentioned that nearly $1.0 trillion dollars has exited from emerging markets over the past few months, suggesting that pessimism among investors is gaining some momentum. “The bank credit analysts said there will be a bloodbath in emerging economies—we already had one to a large extent. If you adjust the poor market performance and the currency weakness—probably more to come—but I don’t believe the U.S. will not be affected at all and I would look at valuations.” “Valuations are not exactly cheap in emerging markets but they are becoming reasonable […] I think the U.S. will be the last to unfold.” –PC