China Market Crashes; U.S. Market Undervalued
On Monday the U.S. market was dragged downward from China’s stock market crash. News outlets are speculating that this could be the end of an artificially inflated Chinese stock market, and its effect on the U.S. exchange.
Wait. Slow down a bit.
Yes it is true that the Chinese government has its hands a bit much in market regulations, but the Chinese stock market is not going anywhere.
Crashes are primarily caused by fear of the other guy. No one knows what the other is doing, therefore to get a “jump start” on the competition, they sell before the other guy has a chance to sell. Little do they realize that the other guy has already sold.
This cycle continues repeating itself until the undervalued stocks are all held by the rational, fundamental investors that had the discipline to purchase at extremely low valuations.
The Chinese stock market crash presented a great opportunity for us today – the U.S. markets are now at the lowest median P/E and P/B ratios since February 2015.
After profitability trading Put options for the past few weeks, today I personally loaded my portfolio with long positions. Why? Because the market moves in waves. A huge drop today usually means a correction tomorrow.
Although there is never a guarantee on market movements, you can still put yourself on the winning side with buying undervalued companies when the market is low and selling overvalued companies when the market is high.