Silicon Valley Bank’s failure! Global contagion fears! Fright over America’s Federal Reserve! Western inflation still raging! What horrors beyond China’s borders could shock world stocks and reverberate in the Middle Kingdom? Potential pitfalls are front of mind for me today, and always. But my worries aren’t hotly hyped fears like those above. Nor are they the U.S.-China tensions so many Western commentators fret. All are too widely watched. Instead, threats to my contrarian bullish 2023 outlook are stealthy risks few presently fathom. None seem ripe to impale stocks now. But that can change fast. Here are some worth watching.
In February, I told you why widely watched domestic worries won’t derail Chinese stocks’ rally since October. Neither recent dips nor China’s “conservative” GDP target change that view. But global forecasters fixate on foreign risks threatening China’s market, too — “systemic” financial risks, weak Western earnings stinging exports, the Ukraine war and more. Trade ties and global trends do mean China isn’t immune to overseas trouble — Chinese stocks’ 0.61 correlation with world stocks shows they move together more than not, given 1.0 is lockstep movement and -1.0 is polar opposite. But fretting over widely known issues is wasted worry — efficient markets pre-price widely known data, opinions and news, fast and continuously. That saps surprise power. Big new surprises move markets most.
