It’s one thing after another with China right now, with the latest event being the devaluation of the Chinese Yuan.
Such big news has already taken its toll on the U.S. markets, but it may be far from over at this point. If history is any guide, there’s still plenty more to be worried about.
Here’s how the potential for China’s Yuan to fall further could impact parts of the U.S. marketplace…
China’s devaluation of its currency was depicted as a one-time thing, and that adjustment totaled about a 3% devaluation. But that may be only the very beginning of more tinkering, with some insiders expecting more adjustments and the possibility for a fall for the Yuan reaching the double digits – around 10%.
That could be very bad news internationally, but specifically for U.S. companies that make large chunks of their revenue by selling to China.
Obviously when those sales are converted into U.S. dollars, the profits will take a pretty significant blow. And one such section of the financial ecosystem that appears to be in the center of the crosshairs is consumer-product multinationals.
And U.S. corporate earnings are taking a relatively hefty blow as well, as China’s struggles pull down the global commodities market. For companies in the S&P 500 index, a benchmark representation of the overall market, the 2015 operating earnings per share results are projected to have declined more than 1% from 2014.
And all of this is happening on what we can now assume will be the eve of short-term rate hikes from the Federal Reserve. Next month’s policy meeting is expected to result in the first of a number of eventual hikes.
Plus, we’ve experienced a plateauing stock market since around the beginning of 2015. This is a new chapter for Wall Street, and one that could cost you a lot of money if you invest in the wrong place. Yet that means you could also gain tons of money on the backs of falling stocks if you know how.
I expect some of those potential cash cows will be identified in the next issue of Midas Premium…
