Global financial markets have become more volatile the past two weeks as news about crashing stock prices in China has made headlines. After a spectacular rally fueled by the use of margin, this collapse was long overdue. As of their peaks in mid-June, the Shanghai index was up around 150%, and the Shenzhen index was up close to 200% over the prior 12 months. Despite the sharp losses incurred over the past few weeks, both of these indexes remain up approximately 70% over the past 12 months as of July 8th. Due to restrictions on foreign investment, most investors in the U.S. have very little, if any, direct exposure to the A-share, yuan denominated stocks on these two exchanges.

While recent stabilization in these markets is encouraging, the longer-term impact on China's economy and its trading partners will depend on how the markets respond over time to the government's efforts to stabilize the market.

Glenn S. Rank, AAMS, President