In an interview with FOX Business Network’s Maria Bartiromo, Marc Faber of the Gloom Boom & Doom Report said China volatility has hit the global markets and will spill over into the U.S.
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“We have a big selloff in emerging economies. In dollar terms many emerging markets have tumbled. The U.S. is essentially the last man standing, and I think it will spill over to the U.S…. GM-- about 34 percent of the sales are in China and close to 50 percent of the profits come from China… In July car sales were down 7 percent and more to come,” he said.
Faber speculated why China devalued its currency.
“We don’t know exactly why China began to weaken its currency. It could be because of massive capital outflows. It could also be a warning signal to the world that if the world, notably the U.S., doesn’t treat China fairly -- and they have some reasons to believe that certainly from their perspective, that they also can embark on economic and financial warfare,” he said.
With nearly $1 trillion exiting emerging markets in the past 13 months, Faber expects the U.S. to also be affected.
“The bank credit analysts said there will be a bloodbath in emerging economies -- we already had one to a large extent. If you adjust the poor market performance and the currency weakness -- probably more to come -- but I don’t believe the U.S. will not be affected at all and I would look at valuations. Valuations are not exactly cheap in emerging markets but they are becoming reasonable… I think the U.S. will be the last to unfold,” he said.