The Independent Market Observer

What Mattered This Week? China, Interest Rates, and Fundamentals

Posted by Brad McMillan, CFA®, CFP®

Find me on:

This entry was posted on Aug 18, 2023 3:21:57 PM

and tagged Commentary

Leave a comment

Economic SlowdownThis has been a busy week, with a number of developments that, at first glance, seem concerning. But how worried should we be? Let's get right to what mattered.

China's Economy Slowing

The first was China, where economic growth has slowed dramatically, and its markets are sliding as a result. You can tell this slowdown matters by what the Chinese government has been doing, such as stopping reports on youth unemployment and supposedly telling investors not to sell stocks.

While things aren’t likely as bad as some of the more alarmist reporting suggests, it seems clear that growth is a lot lower than expected. And with an economy of China’s size, that matters for the world as a whole.

Interest Rates Climbing Higher

The second thing that matters is here in the U.S., where longer-term interest rates are moving toward the highest levels in the past several years. Apart from a spike last October, the yield on 10-year U.S. Treasuries has been below 4 percent since around 2008—and the recent move above that level is a big shift. The real question is whether rates will keep moving higher, and markets seem increasingly convinced it is a real possibility.

Markets Pulling Back

This brings me to the last point of the week, which is the market pullback we have seen. Markets around the world are down between 2 percent and 3 percent this week, with worries about global growth—led by China concerns—and higher interest rates rattling investors. In one sense, this is neither a surprise nor something to worry about, as August tends to be a weak month. But when you look at the news, it suggests we need to pay attention.

Strong Fundamentals Beat Expectations

Despite the worries, the fundamentals remain solid, as retail sales and industrial production in the U.S. came in strong and much better than expectations. The strong fundamentals here should help to cushion any shocks we get.

And that’s not a bad way to start my vacation. I will not be posting next week unless something comes up, so here’s hoping we all have a good week, and you don’t have to hear from me.

Have a great weekend!

Subscribe via Email

New call-to-action
Crash-Test Investing

Hot Topics

New Call-to-action



see all



The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.


Please review our Terms of Use

Commonwealth Financial Network®