We would guess that while there will be quite a bit of volatility, very likely oil and stocks, after some period of repeat-testing support levels, will rise. For practical purposes, barring a crisis in Europe or some other out of the blue event, both have likely bottomed. The question is how far and how fast stocks and oil will rally. Our guess is that much will depend on the trajectory in oil. If oil’s gains are moderate but steady then stocks should gain at least 15 percent from current levels. On the other hand if oil takes off and quickly doubles in price then stocks will likely experience another sharp correction after their initial rise.

Our thinking is informed by China, whose growth has become essential for worldwide and U.S. growth. Despite the growing talk of over capacity in China and its prospects for a hard landing, we believe the Middle Kingdom will likely grow at least 6.5 percent this year and possibly more. On a worst case basis, China’s economic growth should still exceed 6 percent and the country should contribute enough to worldwide growth to sustain moderate growth in America.

The key to our thinking is that over the short term the bout of very low commodity prices has been a boon to China and fits very neatly into the country’s long-term plans. A recent Bloomberg news piece cited calculations by former Goldman Sachs Asia vice chairman Kenneth Courtis, and currently Chairman of Starfort Holdings. His work showed China saves nearly $500 billion annually by virtue of low commodity prices. This is a major plus for the economy in many ways—from lower costs of goods and services and boosting consumption to giving the government more leeway in making economic adjustments.

The savings, however, are not an unalloyed blessing in that low commodity prices have harmed those parts of China dependent on manufacturing commodities production. These include industries that range from steel to refining and petrochemicals, as well as agriculture. China has 23 separate provinces and 10 other economic divisions administered by party secretaries or other comparable officials.

 According to Andrew Batson, the lead China researcher for Gavekal Dragonomics and a nonresident fellow at the Paulson Institute, only four of the country’s provinces have experienced growth of less than 5 percent. Not surprising the economies of Heilongjiang, Liaoning, Hainan and Shanxi all depend on commodities production output and/or refining basic materials. Of the other provinces, 11 grow at a rate in excess of 8 percent, 7 at about 7.5 percent, and 9 at about 6 percent. (The breakdown does not include special administrative regions Hong Kong and Macau, considered to be separate economic entities from Mainland China.)

The four low-growth provinces have likely overstated their growth and could be growing closer to zero percent, but the 27 provinces with positive growth on balance likely understated their growth by virtue of a lack of the hedonic regression adjustments so common in America and the lack of other aspects of growth that the West commonly associates with services. As we repeatedly noted before, authoritative studies on China’s GDP suggest that growth has been understated. Given the sharp turn down in the three “rust belt” provinces and the agricultural province, Hainan, overall growth of about 7 percent is probably about right.

China plans ahead. We would hope to see another article on the so-called Ghost Cities, mostly clustered around major cities and, according to Ghost Cities of China author Wade Shepard, were likely planned 25 years in advance. Clearly President XI did not wake up one day and tell himself he’d turn Shanghai into a megatropolis with a population of over 100 million people. Moreover, Xi did not all of a sudden initiate the One Belt, One Road (OBOR) initiative, much larger in scope than the Marshall Plan and by some measures estimated to require an initial $21 trillion investment and a trading pact between over 50 countries across Eurasia and the Middle East. We should also mention that Xi’s 2020 goals for a moderately prosperous society were originally established by Deng Xiaoping in the 1980s and reiterated by China’s then-President Jiang Zemin in 1997. If you extend the Chinese thinking out to mid-century, recent statements by China’s Electric Grid chief suggest another $50 trillion could be spent in the region by development of a renewable energy platform.

This kind of long-term thinking is part of China’s ethos, formed over four millennia. Two Yunnan University researchers, Chen Lanjian and Zhang Wei, suggest in a recent article that much of what the oversupply we see in China today owes to OBOR in that initial exports will derive from the energy and steel industries, which account for some 42.5 and 25.4 percent, respectively, or nearly 68 percent of China’s overcapacity in all industries. This excess capacity dovetails with the initial needs of OBOR participant countries. Steel and energy go together; to run steel smelters takes energy and steel will be vital to fulfill initial infrastructure needs.

Energy and especially refining will also play a critical role and fulfill initial infrastructure needs in undeveloped Eastern countries; by our calculation China has accumulated at least a billion extra barrels of oil, a number still growing. One of China’s initial goals for OBOR is to define itself as an integrated Eastern energy hub. Increasing refining capacity, already able to supply more than China itself needs, its massive accumulation of oil, and plans to establish a third benchmark denominated in yuan all conjoin with this plan, likely in the works for many years.

All said times remain very volatile. Indeed it is likely that we are at the start of a new point of inflection in a process that began at the turn of the century; in other words, best guesses are highly uncertain.