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With all the talk of a market rally driving the S&P to post crisis highs, top trader Steve Cortes is confounded that pros are all but ignoring a very serious situation.“ China is trading at its lowest levels since the 2007 crisis and that’s a big problem for the markets,” says Steve Cortes, founder Veracruz, a research and consulting firm. Here’s why.
Cortes sees the weakness as a sign that China's economy is slowing far more rapidly than most investors seem to understand. And unlike the US, Beijing can’t embark on widespread easy money policies.
That’s because, unlike the US, for the average Chinese citizen, a large portion of income goes toward buying food. If Beijing stimulates the economy aggressively, they risk inflation - particularly in food prices. Read More: "Food Price Shocks— Is Asia Bracing for an ‘Acute’ Jolt?"
In the past, a rapid rise in food prices has triggered civil unrest in China's poorer regions. Cortes argues that Beijing can't afford that kind of risk.
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