[Good Morning Stock Market] Reality of 2nd COVID-19 Pandemic... "Volatility in Domestic Stock Market Inevitable"

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] As concerns over the second wave of the novel coronavirus infection (COVID-19) materialize, global stock markets have plunged sharply.

On the 28th (local time), major indices on the New York Stock Exchange fell by over 3% due to fears of the rapid spread of COVID-19 and the strengthening of lockdown measures in various countries. This is interpreted as a result of the rapid deterioration of the COVID-19 situation centered in the United States and Europe. In the U.S., the 7-day average of new confirmed cases surged to around 70,000, and countries like Germany and France announced nationwide lockdown measures.

Market experts predict that due to this global spread of COVID-19, domestic stock markets will inevitably experience increased volatility until the results of the U.S. presidential and congressional elections are decided.

◆ Seo Sangyoung, Kiwoom Securities Researcher = The European and U.S. stock markets plunged sharply as fear surged due to the uncontrollable spread of the COVID-19 crisis. In particular, the announcement of nationwide economic lockdowns by France and Germany raised concerns about delayed economic recovery, which acted as a burden. This is presumed to increase the possibility of economic contraction in Europe and the U.S. in the fourth quarter. Regardless of whether Trump or Biden wins the presidential election, it can be seen as increasing the possibility of economic lockdowns in the U.S., so a contraction in investment sentiment is inevitable for the time being. Additionally, the delay in the results of the crucial Senate elections in the U.S. presidential election is also a burden. In particular, since the gap between candidates from both parties is not large in some regions, runoff elections may be necessary, and results may not be decided until January. If legislative and executive powers are not unified in implementing all policy agendas, uncertainty surrounding the execution of fiscal policy may increase. Therefore, even if Trump is elected but the House is controlled by the Democrats, or if Biden is elected but the Senate is controlled by the Republicans, the speed of fiscal policy execution in the U.S. in 2021 may be delayed, which is inevitably negative for the stock market.

The Korean stock market will inevitably experience increased volatility until the results of the U.S. presidential and congressional elections are decided. Today, as in the U.S. market characterized by subdued investment sentiment, it is expected that a stock market with expanded fluctuations in stocks due to earnings announcements and related analyses will unfold.

◆ Han Daehun, SK Securities Researcher = The evil spirit of COVID-19 has engulfed global stock markets. Major U.S. indices fell more than 3%, marking the largest drop since June 11. There are two main reasons. First, the resurgence of COVID-19. The U.S., where daily confirmed cases have continued to rise, is showing signs of reintroducing lockdown measures centered on some states including Illinois.

The situation in Europe is even more serious. Germany and France have also implemented lockdown measures, and the fear of COVID-19 has once again dampened investment sentiment. The second reason is ongoing political uncertainty. Although COVID-19 is resurging, the U.S. economic stimulus package remains deadlocked, and its passage before the election is virtually impossible. Ultimately, concerns that stimulus negotiations may be sidelined despite the resurgence of COVID-19 acted as a negative factor. Additionally, noise from the attendance of major IT company CEOs such as Facebook at Senate hearings also seemed to have a negative impact.