The volatility plaguing the stock market will not cease until investors get a clear resolution about the state of the Chinese economy and the pace of the Federal Reserve’s rate hikes, said Luke Tilley, chief economist at Wilmington Trust. Regarding the China question, Tilley said he does not think that growth in China is nearly as strong as the government’s projected 7% year over year growth. On the other hand, he does not think they are in the midst of a so-called hard-landing. He views it somewhere in the middle. Tilley added that while China’s direct trade relationship with America is not large enough to stunt America’s economic growth, China’s role as the second largest economy in the world certainly does play heavily into investor sentiment. ‘To the extent that if it was true that they were going through a hard-landing then that would be a slow-down for global growth and of course that does have real impacts for equities around the world,’ said Tilley. As to the Fed’s role in feeding investor uncertainty, Tilley expects a rate hike in December, although he said a September move remains a viable option depending on how the members of the committee think about inflation expectations.
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