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By Jason Stipp and Jeremy Glaser | 08-21-2015 02:00 PM

What to Make of the Market Mayhem

As the market focuses on China and the Fed, investors should keep an eye on the long term.

Jason Stipp: I'm Jason Stipp for Morningstar. After a couple of brutal days in the market this week, we're checking in with Morningstar markets editor Jeremy Glaser for his take on the situation.

Jeremy, thanks for joining me.

Jeremy Glaser: You are welcome, Jason.

Stipp: We saw a big sell-off on Thursday followed by another sell-off on Friday, what's driving all of this activity as investors are heading toward the exits?

Glaser: Well, it's virtually impossible to ever pinpoint one exact cause for any given day's movement in the stock market. But I think, overall, investors are concerned about the global growth picture and, in particular, are concerned about China. Going into this year and throughout this year, I think there was some hope of global growth looking a little bit better. Europe really seemed to be turning the corner, the United States continued to chug along, and China--although slowing--would be able to manage that slowdown and that they weren't going to have that hard landing, as people used to talk about.

Over the last couple of weeks and, in particular, into this week, I think there are signs that maybe that thesis just isn't going to hold--particularly when it comes to China. We've had a lot of bad news and unusual news out of China. With the devaluation of their currency, they said they are going to let the market decide and then at the last minute intervened because the market was deciding too much. Also, the intervention in the Chinese stock market and the weak manufacturing data, I think, have really hurt the market's confidence in China's ability to manage the economy and to manage this transition from a very investment-led economy to more of a consumer-driven one.

I think that's something that's starting to concern investors as they think about the impact on Europe, which has more direct trade with China. What's the impact on the United States? How does it impact global currencies? How does it impact the global monetary market and commodities? How does it impact what's happening with emerging markets? As people revaluate that, you are starting to see some of that shake out through the global stock market sell-off.

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