Four weeks ago, I told my China Strategy subscribers that in order to calm the financial crisis, countries around the world needed to follow China’s example.

China’s leaders understood the severity of the global financial and economic problems in mid September—long before many countries would even acknowledge it. Immediately following the Lehman Brothers collapse, China made a decisive move to protect the country’s economy—the Chinese government slashed interest rates by 27 basis points and lowered the reserve-requirement ratio for banks by 1%.

It was the first rate cut for the country in six years, and it couldn’t have come at a more strategic moment. At that time, I stressed the importance of a global coordinated rate cut.

However, instead of immediately following China’s smart move and cutting interest rates, the U.S. tried several other routes to solve the financial crisis first. Each of these routes have been steps in the right direction, but none have supported the markets or economy the way a quick rate cut would have after the collapse of Lehman Brothers.

Third Time’s the Charm?

After several financial institutions across America collapsed in a domino effect in September, the U.S. government tried to inject funds into the markets with a historic $700 billion bailout plan. This rescue plan briefly supported the markets, but investor confidence soon fizzled as they realized that the U.S. financial crisis had spread beyond our borders and had damaged financial markets across the globe.

So two days later, the U.S. Federal Reserve came up with another plan to try and boost confidence and support the markets. The Fed said it would create a fund to purchase commercial paper, which would help companies fund their payrolls, inventory and other cash needs. Some investors thought this would surely boost the markets, but instead the markets plummeted further.

And then finally, last Wednesday, it seems that the U.S. government finally came to its senses and made a third attempt to stabilize the markets.

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The Fed, along with other central banks around the world like Europe, England, Switzerland, Canada and Sweden, cut interest rates by 50 basis points. And China did its part—again—and slashed its rate by 27 basis points. 

But four weeks have already passed, and the global rate cuts may have been too little, too late. I doubt that the financial crisis would have reached these extreme levels if the world would have followed China’s example weeks ago. But now, more than $4 trillion in stock market valuation and millions have jobs have been destroyed. And stock markets around the globe are setting new 52-week lows on a seemingly regular basis.

So, where do we go from here?

A Bumpy Road Ahead

Even though some positive moves have been made to curb the spreading financial crisis, there is no such thing as a perfect solution. And I’m expecting plenty of market volatility in the upcoming days and weeks. Just take a look at what happened last week after the rate cuts: In three days, the Dow Jones Industrial Average plunged more than 1,000 points!

But amidst this turmoil, I am still growing optimistic that a rally is near. The intraday market swings that we are now seeing are typical of a market bottom, and I’m expecting the market to rally in the fourth quarter. Now that doesn’t mean that you should be bottom picking. Instead, it is wise to make only strategic investments in companies set to profit from a fourth-quarter rally. (See also: “Why China, Why Now? 3 Top Stocks.")

This is exactly what my China Strategy subscribers are doing right now. I have recommended that they remain cautious and only add to their positions of fundamentally sound companies. Just last week, I suggested purchasing shares in two of our top stocks. One is a leading telecom company in China that has some significant projects its pipeline. And the other is a top Chinese medical device manufacturer with 50% annual earnings growth.

Both of these companies should benefit from the coming rally. The fourth-quarter rally could begin any day, so to learn which companies to buy in preparation for the upcoming bounce, join China Strategy risk-free today! In addition to monthly issues of China Strategy, you’ll receive weekly updates and special alerts anytime there is urgent market news. Plus, 5 FREE Special Reports, including "5 Stocks to Buy Now" and "Wall Street’s Biggest Losers: Stocks to Avoid." Click here now to learn more about this special offer.