Why Was The Market Down Today?

Unless you’re a professional money manager, you don’t watch every minute of the stock market.  Most of us have full time careers, lives, etc. that keep us busy.

However, if you happened to check your brokerage account today, you might be wondering: “What the hell happened today?!?!?!”

What seems to have happened, for one, is the market is not so confident in this so-called trade truce between the US and China.  It breeds uncertainty.  The markets hate uncertainty.

There is also talk of the Federal Reserve raising interest rates.  I am going to discuss this in greater detail tomorrow.

What is important to remember is this: when you’re a buy and hold investor, headline items like this don’t mean that much to you.  Just keep holding on to what you have, and take advantage of times like these to add to your positions in good companies at a discounted rate!

 

The Chinese Bear!

The threat of a trade war with China is continuing to wreak havoc on the shares of some of China’s largest technology companies.

This means that the share prices are becoming very attractive!

Chinese stocks are in a bear market.   The 50 million dollar question is how much longer it will last.

It’s impossible to know.  However, I saw a similar scenario in 2015, in which Chinese stocks were down seemingly every day.

At that time, I bought shares of Alibaba (NYSE: BABA) at a price of $80, and it went down to $55.  Over the next three years, it would go from $55 to $211.

I understand the fear investors have regarding a trade war.  But I don’t think either Trump or Xi Jinping wants an all out trade war.

Regardless, the prices of Chinese stocks are continuing to fall.   Here are some companies to put on your radar if you want some exposure to China.  The percentages represent how much they are down from their 52-week high.

Alibaba (NYSE: BABA): down 27%

Tencent (TCEHY):  down 35%

Baidu (NASDAQ: BIDU): down 26%

NetEase (NASDAQ: NTES): down 49%

Baozun (NASDAQ: BZUN): down 33%

There is a secular trend in China regarding the emergence of the largest middle class in history.  That trend isn’t going away.

When you think about the economic impact this can have on companies, think Walmart (NYSE: WMT) and Home Depot (NYSE: HD).  These are two of the best performing stocks in history, and they were both disrupters that benefited from the emergence of the American middle class.

This story will play out over the next 25 years…not 25 days.

Until next time!