China Puts the Smackdown on the United States

In the United States, we used to be able to chant, “We’re No. 1; we’re No. 1.” Well, we can’t do that anymore — at least when it comes to the size of our economy.

According to the International Monetary Fund, when you measure national economic output in “real” terms of goods and services, this year China will produce $17.6 trillion vs. the United States, which will produce $17.4 trillion.

While this total output figure doesn’t tell the whole story, it does suggest that at least by this important metric, we aren’t No. 1 anymore. That distinction belongs to our neighbors in the Far East.

For investors, China’s smackdown of the United States here is something that should be embraced, especially because size does matter when it comes to investing in international markets.

Take a look at the two-year chart here of the Shanghai Composite Index ($SSEC). As you can see, Chinese stocks trended lower from early 2013 through mid 2014. Since then, however, there has been a huge rebound in Chinese stocks.

This big rebound has taken place due to various factors, including Chinese stock market reforms, an interest rate cut by the People’s Bank of China and a stabilization of economic growth.

I suspect that this trend will continue in 2015, as investors look to ride momentum in international sectors and also as stocks here at home rise to overbought levels. Then there’s the issue of the increasingly strong U.S. dollar, which could actually have a negative effect on U.S.-based equities.

In my Successful ETF Investing advisory service, we’ve been on board the China train for some time, and my subscribers currently are profiting from several funds pegged to the fate of the new global economic No. 1.

If you’d like to find out more about how you can make money investing in China, check out my Successful ETF Investing newsletter right now.