A lot of people are fond of asking, "What does China have to do with us? We should be fine if we just invest in U.S. companies."
Today's action is a very clear lesson on how intertwined the global economy—and global investing—has become.
It's not just that commodities are down, and the commodity stocks are down with them.
It's a lot more complicated than that.
China is a significant part of the revenue for many global companies.
And for a few, such as casino owner Wynn Resorts, fast-food restaurateur Yum Brands, and several big semiconductor companies like Broadcom, Qualcom, and Micron, the revenues from China are half or more of their businesses:
China revenue exposure:
Wynn Resorts 70%
Yum Brands 52%
Many auto companies get significant revenue from China, particularly German automakers like BMW (which already spoke of weak German demand) and Daimler and Volkswagen, which is why the German market is weak today. U.S. car makers have smaller exposure.
China auto exposure
Finally, one of my favorite sectors—globally diversified industrials—also have some of the larger names with significant exposure to China:
Industrials China exposure
Dow Chemical 11%
Johnson Controls 6%
Ingersoll Rand 6%
Finally, Apple gets 16% of its revenues from China. While this is small compared to the 38% in revenues it gets from the U.S., China is a fast-growing market: revenues from China are up nearly 11% year-over-year, while they are down 2.7% in the U.S.
And that's an important point: for many companies, China was an expected revenue growth driver. Dow Chemical's China revenues were up almost 8% year over year, same with 3M.
But now the bubble is bursting, and China is not going to be a revenue growth driver. That puts even more pressure on the U.S. and Europe to make up the difference.