What’s two school busses long, gets more attention than Trevor Noah’s Grammy jokes and goes down faster (but apparently not fast enough) than Ben Affleck’s interest in J.Lo?

A balloon. But not just any balloon. A shot-down Chinese balloon that many believe to be spy equipment.

Prepare for disappointment because you won’t find any conspiracy theories here. Okay, maybe just one: Who’s really behind the balloon…

Instead, we care about one thing: your portfolio’s well-being.

And the US-China tensions from the balloon may have spooked investors.

Since the balloon was first discovered, the Invesco Golden Dragon China ETF (NASDAQ:PGJ) — a basket of US-listed Chinese stocks — has fallen 7%.

• That’s barely noticeable when comparing it to the ETF’s massive 70% rally since Oct. 2022.
• But even that looks small compared to its 61% drop from its 2021 peak.

A range of factors has driven volatile Chinese markets. Here they are, ranked from most impactful to least:

1/ China reopening its economy (+). The talk of the town and the key reason behind China’s major rally.

Is it sustainable? Here’s what two banks are saying (BBG):

• Citigroup believes that Chinese stocks have more potential to increase in value due to China’s strong economic outlook.
• Jefferies expects earnings upgrades from US-listed Chinese companies, which could send stocks higher.

2/ China politics (-) with Taiwan-China tensions and a trade war between the US and China at the center of attention.

But no matter how much the US and China squander, it’s hard to ignore the data: Trade volumes continue to break records.

3/ China’s property crisis (-), the elephant in China. Flashback to 2022 when 30+ developers defaulted on debts, and Chinese buyers refused to pay mortgages on property projects.

The risk is still there. Last week, the IMF warned that China’s real estate crisis isn’t over yet.