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Wall Street's China Evergrande Fears

Today is Tuesday, September 21, 2021.

Wall Street's China Evergrande Fears Sink Stocks

Global equity markets fell sharply Monday due in part to a debt crisis involving a Chinese real estate developer.

Background: The Evergrande Group, a real estate company based in China, is under pressure to repay $300 billion in debt. The company had to repay interest on some of the debt on Monday and reportedly couldn’t.

Bigger Picture: While China’s real estate problems are nothing new, this might be different. Evergrande comes with a supposed “too big to fail” label, meaning the collapse of the company could send economic shockwaves in China and around the world.

Performance: The Dow Jones Industrial Average fell 1.78% Monday. The Nasdaq Compose dropped 2.19% and the S&P 500 went down 1.7%.

Taking the Temperature: Some investors are optimistic that this downfall will turn around soon, as early as this week. They view Monday’s drop as profit-taking from months of growth. But, pessimistic investors worry that this is the start of a crash.

Final Thoughts: Despite the downfall, some investors see this dip as a buying opportunity.


Notable Earnings Today: FedEx (NYSE: FDX), Adobe (Nasdaq: ADBE), Aurora Cannabis (Nasdaq: ACB), AutoZone (NYSE: AZO), Stitch Fix (Nasdaq: SFIX), Neogen (Nasdaq: NEOG), Apogee (Nasdaq: APOG).

Notable IPOs Today: HHG Capital Corporation Units (Nasdaq: HHGCU) CrossingBridge Pre-Merger SPAC ETF (Nasdaq: SPC).

Notable Equity Crowdfunding Campaigns Ending Today: prostainable (Honeycomb), Veer (StartEngine).

Notable Economic Events Today: Building permits (8:30 a.m. ET), Housing starts (8:30 a.m. ET).

Optimists Buy Bitcoin Dip Amid Price Drop

As the global markets sank due to the China Evergrande debt crisis, prices of Bitcoin also fell over 9% Monday to $43,000.

But some investors are optimistic that the price of Bitcoin will rise soon.

Context: In addition to Bitcoin, prices for most other cryptocurrencies fell on Monday as well. Etherum and Dogecoin each dropped around 9% on the same day.

Bullish Call: EQIFI CEO Brad Yasar wrote in an email Monday that Bitcoin will bounce back and hit $100,000 by 2022 or by this November, according to Investing.com.

Big Buy: With Monday’s price drop in place, El Salvador reportedly bought 150 Bitcoins at a discounted price.

Final Thoughts: If there was ever a moment for Bitcoin to shine, it would be now that the stock market is slipping.

Gold’s Inflation Theory Under Fire

The threat of inflation, when the prices of goods and services rise, has resulted in investors looking at alternative opportunities. Gold, which is often seen as the standard hedge against inflation, is one of those opportunities.

Argument For: As a physical asset, gold investors have argued that this commodity holds its value against inflation. During the Great Recession, interest in gold shot up as the price increased.

Argument Against: However, historical data during the 1980s and 1990s suggests that gold investments resulted in a negative return during inflationary times.

Data: The price of gold is up slightly in the past six months. In fact, the price of gold in the past few months peaked in early June.

Final Thoughts: Unlike other previous time periods, gold has some competition. There are other hedge investments including cryptocurrency and equity crowdfunding.

Trends We Are Chirping About

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