Everybody Has Their Thing

U.S. investors have typically shown a penchant for putting their wealth in stocks. At the height of the dot.com boom, U.S. households held upwards of 30% of their financial assets in stocks.

For the Chinese, displays of wealth and status come from buying real estate… and art. Ungodly-expensive art, as I wrote about in our November issue of Boom & Bust.

So relatively speaking, the Chinese stock market just doesn’t have the same appeal the U.S. markets enjoy. As you’ll see in the chart below, New York and Shanghai are really a tale of two (very different) cities.

See larger image

In late 2007, U.S. and Chinese stocks peaked at the same time.

In early 2009, these stock markets bottomed together.

And for a while, heading into 2010, both U.S. and Chinese markets moved higher in a surging, V-shaped recovery.

But that’s where the correlation ended. Since the beginning of 2011, U.S. stocks, as measured by the popular S&P 500 ETF (NYSE: SPY), have gained about 43%.

Over the same time, Chinese stocks are down 10%.

That’s a whopper of a performance gap!

For everything China has going for it in the economic-growth department, investors have clearly shunned Chinese stock investments. U.S. stocks, especially in these “new normal” times, seem far more stable.

Watch for this trend to continue as investors enjoy the safety, and superior returns, of U.S. markets relative to China’s volatile, underperforming stocks.

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Categories: Markets

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.