Warren Buffett may love his railroad investment enough to grab a ukulele and sing about it, but the reality is the prospects for the stocks of planes, trains, autos, and toys are largely a function of forces outside even the Oracle of Omaha's control. First among these is China.
China's GDP surprised to the upside in the 4th quarter, coming in at 8.9% vs. estimates of 8.7%. While the "beat" was nice, the growth rate was China's slowest since 2009, raising questions as to whether or not they'll be able to engineer an economic soft landing.
With the Chinese New Year celebration starting today, it seemed an apt time for Breakout to look below the always murky headlines coming from the quasi-communist nation. Joe Quinlan, the chief market strategist at U.S. Trust Bank of America Wealth Management (note: Bank of America is the sponsor of Breakout) says it's about intangibles.
"It's the quality of growth," he says. "(China) needs to transition away from export and investments towards consumption."
While U.S. consumer spending accounts for nearly 70% of GDP, only 35 to 36% of Chinese GDP comes from consumer spending. According to Quinlan, China has a better than average shot at staying over the 7-8% growth rate, which is the minimum for what would be considered a soft landing.Read More »from Will China’s Year of the Dragon See an Economic Soft Landing?