Price volatility in stock markets is a completely different picture than a prolonged economic failure in China and the globe. We experienced this in 2008 during the housing crisis where jobs were lost and businesses were closed. But a long term bear market for US stocks and a weak Chinese economy could effect global markets for all of 2016 and beyond. The reality is that we are in a soft landing for our own economy and the US Federal Reserve has begun the process of raising rates. It will be difficult for the Fed to do what is needed (stair step rates higher to avoid zero interest rates) with a collapsing global economy around us.
A look back to 2008 and 2009 is the recent example of what happens in the US where jobs disappear and the average middle class family has trouble making ends meet. But the real problem comes on the investment side where business slow downs trickle to new investments and the current recovery we saw in funding and startups slows to a drip.
If you have done any traveling of late you would notice the airports were full of business people hitting the road, selling products, and closing deals. This would come to a halt as managers would pull in the reins and focus on keeping current clients. Obviously, the workforce would shrink and job security would go out the window. This was what happened in 2009, and if you look back nearly all stock bottomed in January 2009 after a scary close to 2008.
A global meltdown would effect everyone, say good bye to vacations, raises summer homes, and additions to the house. But if it last long it can mean terrible things which most of this generation has not experienced. Our economy is vulnerable to global market follow through and the loose money the Federal Reserve has allowed enabled the consumer to keep spending. A consumer shift in spending would cause a buying recession, which cannot be saved by iPhones and Fitbit. The largest fear we have now as market watchers is a consumer recession, which can be long and slow and very difficult to come back from. A global meltdown would start in China but end up at the Apple store.
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