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Investing Specialists

U.S. Economy Bouncing Back, Slowly

While Friday's headlines out of China were bad news for market performance and speculators, it's not an economic or financial system train wreck.

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Net world equity markets were basically unchanged for the entire week. Markets did very well through Thursday. Then stocks were routed on Friday on new fears about Greece's debt repayment combined with new provisions that will make it easier for investors to short Chinese stocks.

Chinese stocks have gone crazy over the past six months with the Chinese government acting as head cheerleader, despite softening economic fundamentals. With few alternatives for Chinese investor cash, a little government encouragement, and regulatory impediments to some shorting, the Shanghai stock exchange has almost doubled in just the past six months. Then on Friday, after the Chinese market close, the Chinese regulators announced that they will make it easier to short stocks, popping a major bubble that many readers have been pointing out for weeks.

Robert Johnson, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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