Lead-Lag Report: Understanding the Turbulence of Financial Markets with Gary Shilling

The stock market has struggled in recent weeks. The S&P 500 slid 3 percent last week, and is down over 6 percent from its 2023 peak. Daily volatility is on the rise, with large swings from day to day as well as during the day.

Human nature hasn’t changed much. So similar circumstances can lead to similar outcomes. For investors, the current financial conditions and market reaction suggest more turbulence ahead.

Right now, the market consensus is bearish in the short term. But it’s bullish in the long term.

Over the long term, that makes sense. Markets tend to rise over time. However, there are times when markets won’t go up. Investors who can go against the bullish grain at the right times can earn big returns.

Plenty of cracks have appeared in today’s markets. China’s multi-decade growth has stalled. Part of that is becoming the world’s second-largest economy. Another part of that is overspending on some parts of the market, such as real estate.

A slowdown in China could lead to a global slowdown, especially for countries exporting commodities to China.

Financial markets are also adjusting to the next phase of globalization. Countries are moving production out of China and into other parts of Asia, as well as India and Latin America. These costs are somewhat higher, but also provide more robust supply chains.

While markets look turbulent, long-term opportunities are emerging in other parts of the world.

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