What a crazy few weeks it has been for investors. And just when we thought that things couldn’t get any crazier, the market takes another gut-punch from out of the blue.
Firstly, there were the bizarre antics from Chinese regulators. They had decided to force private-tuition companies to become non-profit organisations. Whoever came up with that idea must be one sandwich short of a picnic.
It now turns out that private tutors have outsmarted the regulators. They are offering their services on a one-to-one basis to children of well-heeled parents who have the ability to pay greatly elevated prices.
Previously, many middle-income families could also take advantage of tuition services thanks to economies of scale. But now, only the wealthy can afford to give their children a better start in life. Brilliant!
Next, we have the uptick in the number of cases of the delta variant of COVID-19. It is wreaking havoc around the world. It is reckoned that the US could see 200,000 cases a day again, according to the US National Institutes of Health.
The outbreak of the delta variant has already had an impact on China’s economy. It has pushed up factory-gate prices by 9%. Meanwhile, Goldman Sachs has downgraded its expectations for China’s real gross domestic product in the third quarter to just 2.3%.
Elsewhere, there appears to be growing support from within the Federal Reserve to announce as early as September a start to tapering its asset purchases. The central bank’s worry has recently been unemployment. But with nearly one million jobs created in July, it seems that the outlook for jobs has improved.
Let’s not forget what is happening in Afghanistan, too. The country might be thousands of miles away the US, Europe, and China. But the fallout from the region could be quite far-reaching.
There is certainly a lot for investors to digest. But there is always a lot for investors to get their heads around.
The secret, though, is to focus on the things that matter. It might seem overwhelming with so much news to analyse. But what really counts is how the companies we have invested in are coping with the rapidly-changing business environment.
Good companies can learn to adapt to whatever hurdles are placed in front of them. The upshot is that we should make sure we are only invested in those types of businesses. In the words of Warren Buffett: it is much easier to stay out of trouble now than to get out of trouble later.
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David does not own shares in any of the companies mentioned.
