China’s Not Center Of Investing Universe

September 08, 2015

This article is part of a regular series of thought leadership pieces from some of the more influential ETF strategists in the money management industry. Today's article is by David Garff, president of Walnut Creek, California-based Accuvest Global Advisors.

As the global markets have gone into freefall over the past 30 days, the sheer volume of market commentary has increased dramatically.

Sell-side firms, buy-side firms, ETF providers, mutual fund providers and market pundits have all released a deluge of explanations of what has been going on. In general, the theme has been that these types of corrections do happen fairly often in capital markets, and that investors should stay the course.

This has been remarkably consistent, regardless of the type of firm that is providing their intellectual capital.

Some articles started showing up saying that this correction was coming for “months,” and that “everyone knew” the market would be down significantly. Never mind that many of them have “known” this correction was going to happen starting at about 1,500 on the S&P 500.

Truth be told, it is difficult to predict the direction of markets in the short—and even intermediate—term. Let’s keep that to ourselves, though; we wouldn’t want people to think we don’t know what we’re doing. Because that’s what everyone expects.

Hindsight Bias
Regardless of what they say, in their heart of hearts, investors expect their financial advisor/broker/money manager to be able to predict the future. They expect gurus and fortunetellers.

This is fueled by the particularly pernicious effect known as “hindsight bias.” It’s also known as the knew-it-all-along effect. An example of this is when someone is able to explain a somewhat unforeseen event (like the 2008 financial crisis); they feel they (or an “expert”) should have been able to predict it.

What does this all have to do with China? In the past 30 days, we’ve followed all of the market commentaries posted on Seeking Alpha, and specifically those posts related to non-U.S. countries in the top of our rankings.

The China Syndrome
In alphabetical order, the countries are China, Denmark, Germany, Israel, Japan, Korea, Norway, Thailand, Turkey. During that time period, there have been 222 articles posted. The first question is: What percentage of all market commentaries reference China? What about Germany? Or Denmark? The answer might surprise you.

Country # of Times Referenced % of Total References
China 153 68.90%
Denmark 1 0.50%
Germany 27 9.90%
Israel 1 0.50%
Japan 27 9.90%
Korea 10 4.50%
Norway 1 0.50%
Thailand 3 1.40%
Turkey 4 1.80%


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