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Why the stock market hasn't crashed yet because of China's slowing economy

Brian Sozzi

Traders continue to surprisingly laugh in the face of China’s economic slowdown, which is in large part being fueled by the trade war with the U.S.

And as long as the world’s second-largest economy doesn’t completely nosedive, the laughing will probably persist, say Wall Street pros.

Markets are more focused (and more upbeat, subsequently) on how global economic slowdowns will drive stimulus actions by central bankers and governments (especially in China), according to experts. Optimism also rages on because China’s economy does in fact continue to grow, allowing big multinationals such as Starbucks and Apple to benefit from the rise in worker incomes and overall living standards.

“China’s economy has been slowing for years now, so it’s a managed slowdown,” Global X ETFs head of research and strategy Jay Jacobs said on Yahoo Finance’s “The First Trade.” “I think the bigger risk is that there is a hard landing in China, an unexpected drop in output. I just think that is something that is very unlikely given the government’s control over the economy and the consistency of that growth.”

That said, ask any trader five years ago if 6% GDP growth from an emerging market such as China would be completely ignored, and the answer would be “hell no.”

But alas, that disregarding of China’s years-long slowdown persists following the latest mixed read on the country’s economy. China’s economic growth fell to its lowest level in about three decades, per new government statistics out Friday. China’s GDP grew by 6% in the third quarter. Analysts were looking for 6.1% growth.

China’s GDP gained 6.2% in the second quarter. Stocks barely reacted on the latest news.

“Growth is lower, and I think it will be lower for a while given what’s going on with the trade tariffs,” AdvisorShares founder and CEO Noah Hamman said. “But I wouldn’t be too worried about it. I think most investors are invested domestically. And with the Fed increasing its balance sheet, you will see a rise in the stock market again.”

And if pros like Hamman and Jacobs are correct, stocks will continue to overlook China’s growth cool-down.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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