China rate hikes are good for stocks
The nation's efforts to curb economic growth might seem ill-timed, but ultimately they'll help the US market.
The Chinese tighten rates at the most inappropriate times!
Just when we had the dollar on the run, the euro looking good, the Japanese buying Portuguese bonds, the European bourses on solid footing, and a strike at a gigantic Chilean copper mine, they pick now to tighten? They give us a 50-basis-point reserve requirement boost?
When I look at the litany of what there is to worry about, this euro issue has dropped in the standings of major woes, behind $4 gasoline and a hard landing of the Chinese economy.
The former seems a given if oil gets to $110 a barrel, and I think that is possible. The latter? I continue to think that the Chinese will get it right, that they are doing it right, and that while it is incredibly important that they get it right my confidence in their central bankers is higher than for almost any other financial leader save Ben Bernanke (for some that means a low benchmark, but I think he's doing a great job).
That's why I tend not to be so negative about these rate hikes, because I think they are necessary, justified and ultimately good for stocks. We want China to grow just enough to keep taking the world's goods but not so fast that the country slams on the brakes hard.
That's just what's happening.
The pattern of these last few hikes is a hit in the morning and then stabilization at a lower level.
I don't expect it to be much different this time.
Random musings: I would use any sell-off from China to buy agriculture stocks if they come in, because China cannot tame food inflation with rate increases.
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As geopolitical tensions threaten to spin out of control, investors are wondering how best to position their portfolios for the global turmoil.
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