The Markets – February 15, 2024

China is out of favor with investors.

For decades, China was among the fastest-growing economies in the world. Its real gross domestic product, which is the value of all goods and services it produces, grew by about nine percent a year, on average, from 1978 through 2022, according to The World Bank. However, the pace of economic growth in China slowed over the last decade and dropped sharply during the pandemic.

Many investors expected China to rebound quickly in 2023 after its Zero Covid policy ended, but that hasn’t happened. Instead, “Exports weakened and deflation deepened, but the big letdown was consumer spending, which slumped as young people struggled to find jobs and the long awaited reckoning for the housing market finally arrived,” reported Allen Wan of Bloomberg.

China’s stock market performance reflected its economic malaise. “The market value of China’s and Hong Kong’s shares is down by nearly $7 [trillion] since its peak in 2021. That is a fall of around 35%, even as [the market value] of America’s stocks has risen by 14%, and India’s by 60%,” reported The Economist via X.

In recent months, investors have been pulling money out of China. “Much of that cash is now heading for India, with Wall Street giants…endorsing the South Asian nation as the prime investment destination for the next decade. That momentum is triggering a gold rush…The euphoria has made Indian equities among the most expensive in the world,” reported Srinivasan Sivabalan, Chiranjivi Chakraborty, and Subhadip Sircar of Bloomberg.

The Chinese government has been trying to stimulate growth and reassure investors. In late January, “the People’s Bank of China announced a larger-than-expected cut in banks’ required reserve ratio…But sentiment remains about as downbeat as can be, despite reports that authorities are considering a package to bolster the stock market totaling some two trillion yuan (almost $280 billion). That’s not just among Chinese domestic investors—that negativity is shared around the world,” reported Randall Forsyth of Barron’s.

In contrast, U.S. investors have been bullish. Last week, the Standard & Poor’s 500 Index closed above 5,000 for the first time. The U.S. Treasury bond market remained relatively steady as yields on many maturities of Treasuries finished the week about where they started it.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

HOW MUCH DOES A THUNDERSTORM COST? The insurance industry has been examining this question closely. From 2000 to 2022, the median economic loss from severe convective storms (SCS, aka severe thunderstorms) around the world was about $39 billion, according to a report from a 2024 global professional services firm. In 2023:

• Severe thunderstorms inflicted $94 billion worth of economic damage across the globe,
• 28 of the storms were billion-dollar events, and
• 23 of the billion-dollar storms occurred in the United States.

Overall, thunderstorms were the most damaging peril for insurance companies last year. They took seven of the top-10 spots on the list of global insured loss events in 2023.

1. S. drought $6.5 billion insured loss/ $14.0 billion economic loss*
2. Turkey/Syria earthquakes $5.7 billion insured loss/ $92.4 billion economic loss
3. S. severe thunderstorm $5.0 billion insured loss/ $6.2 billion economic loss
4. S. severe thunderstorm $4.4 billion insured loss/ $5.5 billion economic loss
5. S. severe thunderstorm $4.3 billion insured loss/ $5.3 billion economic loss
6. Hawaii wildfires $3.5 billion insured loss/ $5.5 billion economic loss
7. S. severe thunderstorm $3.1 billion insured loss/ $3.9 billion economic loss
8. S. severe thunderstorm $3.0 billion insured loss/ $3.8 billion economic loss
9. Europe severe thunderstorm $3.0 billion insured loss/ $5.8 billion economic loss
10. S. severe thunderstorm $2.9 billion insured loss/ $3.6 billion economic loss

*Insured loss is the portion of an economic loss covered by public or private insurance entities.

The chief climate scientist of a German multi-national insurer said, “We used to refer to regional thunderstorms as secondary perils because they only cause small or medium-sized damage on their own…But as the number of thunderstorms increases, we have to think about a new classification, reported Stephan Kahl of Bloomberg.”

Weekly Focus – Think About It 

“Like a welcome summer rain, humor may suddenly cleanse and cool the earth, the air and you.”

—Langston Hughes, poet

Best regards,

Daniel J. Murphy, CFP®
Murphy Wealth Management Group
60 Merritt Blvd., Suite 106
Fishkill, NY 12524

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