A major stock market drop in China could result in a crash in the global market, according to some market watchers.
“The Chinese Wet market has been dropping pretty much steadily for a few months now,” Mark Williams, chief market strategist at Capital Economics, said in a note Tuesday.
“A dip in the WTI price could cause it to collapse or possibly even trigger a rally.”
Williams said a dip in WTI could result not only in an initial drop in the S&P 500, but also a subsequent rally that would likely lead to a further rise in the index.
A major stock drop in Beijing would also potentially trigger a broader market crash.
In an interview with CNBC on Tuesday, Williams said a stock market dip could be a sign that the U.S. and Europe are on the brink of a global economic crisis and that it is time for investors to start looking for safer assets.
“You’re not going to see a drop in stock prices in China.
You’re going to have a drop,” Williams said.”
I think the Chinese market is not going down as much as some people would have hoped,” he added.”
We’re in uncharted territory,” he said.
“If you look at the history of the last several years, it’s been a big drop in prices in Europe and the U, and then a big rally in the U.”
He also said that China’s government has been working to boost the economy by pushing for more exports, but the result of that has not been enough to slow the slide in China’s stock market.
“It’s really not a coincidence that China is starting to get out of the recession right now,” Williams added.
The U.K.’s Dow Jones industrial average has dropped 9.2 percent in the past week and closed at its lowest point since March 2016, and its benchmark S&P 500 index is down 5.4 percent this year.