[Good Morning Stock Market] "Untangling the Knot Linked to the US Presidential Election Is Key"

[Asia Economy Reporter Eunmo Koo] Concerns are mounting over the contraction of economic activity due to the resurgence of the novel coronavirus infection (COVID-19) and lockdown measures. Given that policy support is unlikely at present, there is an analysis that the upcoming U.S. presidential election is the key to unraveling the tangled situation. The election is expected to have many variables, leading to increased volatility amid a wait-and-see stance until next week.

◆Daehun Han, SK Securities Researcher=Volatility is expanding again. This is because the evil spirit of COVID-19 has once again plunged the world into fear. The recent resurgence of COVID-19 is steep. The U.S. has reintroduced lockdown measures centered on some states, including Illinois. The situation in Europe is even more serious. Germany and France have also implemented lockdowns. The fear of economic activity contraction due to the resurgence of COVID-19 is once again suppressing the stock market. At times like this, policy support is necessary, but political uncertainty is at its peak ahead of the U.S. presidential election. Therefore, this U.S. election is even more important. There is interest in whether the tangled situation can be unraveled.

The U.S.'s fifth economic stimulus package is at a deadlock, but regardless of the election outcome, the stimulus package will be the top priority for discussion after the election. However, as the possibility of the scenario feared by the market increases, concerns are growing that the stimulus package may be pushed to a lower priority. Recently, Trump's support rate has risen in battleground states, leading to a scenario where the owner of the White House is undecided due to Trump's victory in in-person voting and rejection of mail-in ballot results. In such a case, political uncertainty will inevitably rise again. The market was also uneasy when uncertainty escalated in the 2000 election due to the undecided winner in Florida.

Therefore, this U.S. presidential election is important. The expanded mail-in voting due to COVID-19 is the biggest variable in this election. Mail-in voting is problematic not only in procedure but also affects the order of vote counting. In battleground Pennsylvania, there are observations that it may take more than a week to accurately count the votes. In the worst case, the winner may not be known even on election day. Even after the election, if the electoral college list is not submitted to Congress by December 14, an unprecedented situation may occur where the U.S. House of Representatives elects the president. Volatility will increase amid a wait-and-see stance next week as well, but the complex tangle can only be unraveled after the U.S. election.

◆Daejun Kim, Korea Investment & Securities Researcher=Next week, the KOSPI is expected to move within the range of 2240 to 2360 points. The reason for setting a wider band than before is due to the scheduled events in the coming week. First, the Western response to the resurgence of COVID-19 is important. However, more important is the result of the U.S. presidential election, as it can influence the major trend of the stock market going forward. Although less important, the Federal Open Market Committee (FOMC) results are also worth noting. With three variables that alone could cause significant market shocks gathering together, it is natural to see increased index volatility as a result.