Given that the Dow Jones Industrial Average is off by 2%+ Monday morning, it’s interesting to look at the moves of today and how it reflects on China from a few years ago.

Back in August 2015, three consecutive days of deliberate devaluations from the 11th to the 13th by the Chinese Government led to some major occurrences. On the first day, the S&P 500 dropped by about 1 1/3% of its lows and closed down a percent or so off by the time the day was over. Markets are currently already further down in this area, so it’s something to watch.

With regard to China, while a different picture back then because of a steady appreciation of its currency thanks to conversion towards a consumer-based economy, there was some slowing in the economy, similar to now, but more in terms of magnitude. The result was massive amounts of market volatility to the downside in China. It’s something we’re seeing now, but not as much as in 2015.

The importance of this comparison comes in regard to what happened soon after. Looking at the charting of the Chinese yuan vs. the S&P 500, there was a little bit of movement on the downside initially in August, 2015, only to see a big 11% drop a week later for the S&P.

While it rallied back, the big deal was how it acted in concert without other market concerns. As CNBC’s Dom Chu explains, “It wasn’t just China, it was fear of interest rates here in the US and that global economic slowdown.”

Another thing to consider as far as how the markets are moving is that by looking at how the Chinese market and the US markets have moved, you can see China hitting highs, only to hit all the downside market volatility. Meanwhile, the S&P didn’t have nearly as much as that kind of volatility, but there was still a bit of a gap.

The interesting part this time around, as Chu states, “Whether or not the leverage is there from a market perspective between the US or China, you can still argue that China is playing second fiddle to the US in terms of market moves. But if President Trump feels as though the US market can sustain it, this might be a very very big tactic to use with big consequences, positive or negative.”

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