China Secondary Price May Provide Tipping Point

Thursday’s market action is reminding investors that risk is still an important issue to consider. For months, the market has continued to march higher with very few pullbacks and decreasing volatility. This kind of trade can lull investors toward complacency and make markets vulnerable to a sharp “shock to the system” when surprising news causes too many investors to hit the exits simultaneously.

One of the three most speculative (and potentially dangerous) areas appears to be investments in Chinese companies showing attractive growth. With the nation reporting strong GDP growth and the middle-class consumer population expanding rapidly, many investors are willing to pay exorbitant prices to get a piece of the action.