US Stocks Vulnerable If China's Economy Weakens

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The Chinese economy is not doing well lately. Hong Kong's stock markets are close to being in a bad situation.

US companies invested in China are in trouble, especially those on the S&P 500. They will be the first to suffer if things get worse.

China reopened its economy quickly in December after three years of pandemic restrictions. This move was seen as a catalyst for global economic growth.

The International Monetary Fund says that customer demand and manufacturing from the world's second-greatest economy will bring around 35% of the world's growth in 2023.

Things got better in China when they reopened. Factories did very well in February, the best in almost 11 years. The economy grew by 4.5% in the first part of the year. However, new information shows that it might not last.

In May, Chinese exports went down 7.5% compared to last year. People around the world are buying less. China is struggling with other problems, too. People there are not spending as much money as they used to. The factories that make things are also slowing down. Not many people are buying homes, either. Many young people in cities are having trouble finding jobs. The government says 20% of young people are unemployed, which is the most ever.

Investors are scared because of the rising tension between the US and China. American consulting firms, including Bain, Capvision, Mintz Group, and Micron Technology, are being targeted, and this has made multinational companies anxious. The US Ambassador to China, Nicholas Burns, shared this concern on Wednesday.

Goldman Sachs analysts wrote on Tuesday that investors are still not optimistic about China's performance. This is partly due to doubts about short-term growth and partly due to concerns about the future.

China has a lot of people, 1.4 billion to be exact. But recently, this number went down for the first time in over 60 years. This means there are fewer people to buy things, which isn't good for the economy. When China said this news in January, it made the world worried. The Dow (which is a stock exchange) went down by 300 points, and another index (called the Nasdaq Golden Dragon Index) went down by 4%.

If China's economy keeps falling, businesses in America that work with China could have issues. These businesses include Apple, Intel, Ford, and Tesla. They make their products in China. Companies like Starbucks and Nike, who sell to people in China, could also have problems.

Bank of America made a list of S&P 500 companies that deal with China. Las Vegas Sands is at the top with 68% of their sales from China. Their stocks have gone down almost 6% this month.

Qualcomm (QCOM) didn't have great news during earnings last month because they said China isn't recovering fast enough. This is a big problem because 67% of Qualcomm's business is in China.

Big companies like Tesla, Intel, Nvidia, Wynn Resorts, and MGM Resorts all have a lot of business in China. They're part of 25 companies from the S&P 500 with the biggest ties to China.

FactSet data shows that companies making over 50% of sales outside the USA had a profit fall of -10.2% in Q1 2023. Conversely, companies with over 50% of domestic sales had a profit boost of 2.7%.

Chinese stocks in Hong Kong came close to entering bear territory this month. The Hang Seng index dropped 19.6% from its high in January. The Golden Dragon China Index is also down 5.6% this year.

The big Chinese company JD.com has lost 36% this year. Two big banks, Morgan Stanley and Goldman Sachs, think the Chinese stock markets will not be so good.

Economists see a positive possibility. Nomura and Barclays analysts predict a growth rate of nearly 8% for China's economy in Q2.

JPMorgan Chase's portfolio manager, Ayaz Ebrahim, talked to Bloomberg TV. He said the bank is going to buy more Chinese stocks. They think the Chinese government will help weak companies and make stock prices go up.

Canada's wildfires are causing a lot of smoke to cover the United States. It's not good to breathe in because it's toxic. Experts say it's best to stay indoors. But even indoors, the smoke can get in. An air purifier can help clean the air inside your home.

Google trends revealed a 16-fold increase in searches since Monday.

One big company, Whirlpool, has had a good week on the stock market. Their stock has gone up by 13.2% over five days, and 6.4% in one day, Wednesday. They sell air purifiers that can get rid of almost all the bad things in the air.

The stock for Carrier Global (CARR) has gone up by 11% over the course of five days. They manufacture air purifiers and HVAC units for businesses and homes.

JCI has air filters for sale. Their stock price has gone up by 8.5% in five days.

The air purifier market will likely get bigger because the air is getting dirtier due to climate change. Breathing problems will get worse as a result. A report predicts that the industry will grow by 10.8% every year, reaching $2.9 billion by 2025 and $4.8 billion by 2030.

The air outside can hurt humans greatly. By 2060, between 6 and 9 million people could die early from outdoor air pollution. This could cost lots of money too, around $2.6 trillion each year. People would need to miss work to get better. They'd also need to pay more for medical bills. Plus, they wouldn't be as productive at work. The report comes from the Organisation for Economic Co-operation and Development.

The CEO of the world's largest spirits maker, Sir Ivan Menezes, has passed away at the age of 63. He had been suffering from a serious illness for a short period of time.

Diageo said Menezes died on Wednesday. Two days ago, they announced he was quitting as CEO because of problems from emergency ulcer surgery.

Menezes was born in India in 1959. He had citizenship in the UK, US, and India. He worked for Diageo since 1997 and became the CEO in 2013. He received a knighthood in January. He was expected to retire in June but became ill. COO Debra Crew will take over as interim CEO.

Menezes was in charge of a big company that made famous drinks like Johnnie Walker, Smirnoff, Guinness, and Tanqueray. Menezes wanted diverse people to work together.

Nearly half of the higher-up roles at Diageo are filled by women. Over one-third of the company's leaders come from diverse backgrounds.

Diageo's chairman, Javier Ferrán, said Ivan was one of the best leaders of his time. He helped create Diageo and was there for 25 years. He made Diageo a top-performing, trustworthy and respected consumer company.

Menezes made Diageo's market value almost double. Before: $52 billion. After: $93 billion. He made it through Covid-19 too. In 2023, Diageo's sales were 36% larger than in 2019. Diageo said he did a good job.

Menezes did other jobs too. He was a director for Tapestry. He also led The Scotch Whisky Association. He gave advice to Northwestern University's Kellogg School of Management.