[Good Morning Stock Market] US Stocks Rally Led by Biden... Will the Domestic Market Smile Too?

[Image source=AP Yonhap News]

[Asia Economy Reporter Jihwan Park] The U.S. New York stock market reached all-time highs both at the closing and intraday prices on the 20th (local time). On that day, the Dow Jones Industrial Average closed at 31,188.38, up 257.86 points (0.83%) from the previous session. The Standard & Poor's (S&P) 500 index rose 52.94 points (1.39%) to 3,851.85, and the tech-heavy Nasdaq index closed at 13,457.25, up 260.07 points (1.97%). Attention is focused on whether the domestic stock market, which recovered the 3,100 level after two consecutive days of gains until the previous day, can benefit from the Biden rally tailwind in the U.S.

◆ Sangyoung Seo, Kiwoom Securities Researcher= The U.S. stock market rose due to expectations of improved earnings and a sharp rise in large technology stocks. Additionally, the renewable energy sector showed strength following the inauguration of the Biden administration, which was also a notable feature.

However, considering that these factors were somewhat priced in the previous day, the impact on the Korean stock market is expected to be limited. Looking at the characteristics of global stock markets including the U.S., it is important to note that, given it is earnings season, markets are showing sensitive reactions to related issues.

Recently, the market's characteristic was a battle between profit-taking and rebound buying, but now there is a growing tendency to focus on earnings. In fact, the strength in the U.S. stock market was driven by multinational corporations and large technology stocks expected to benefit from the delayed timing of corporate tax hikes.

Of course, it is also important to note that the financial and semiconductor equipment sectors, which had risen significantly recently, declined due to profit-taking. Considering these characteristics of the global stock market, the Korean stock market is also expected to show a digestion process for stocks that had large gains after a rising start, but is forecasted to show strength centered on stocks with high earnings expectations.

In particular, attention should be paid to sectors showing clear growth through export-import statistics announced today up to the 20th. Ultimately, export growth affects corporate earnings.

◆ Sungwoo Park, DB Financial Investment Researcher= The early policies of the Biden administration will significantly boost the U.S.'s short-term growth. However, they are unlikely to be sustainable in the long term. This is because the sharply increased government debt and consequent tax hikes will face the scars of the pandemic and a lowered potential GDP for a considerable period.

As repeatedly mentioned before, the possibility of significant inflation remains low, and an early tapering announcement by the Federal Reserve within this year is not expected. Also, although a more long-term issue, Biden Care is a factor that puts downward pressure on inflation. From the stock market's perspective, the policy environment until economic normalization will generally not be unfavorable due to the favorable policy effects launched early in the administration.

Rather, around the second half of this year, when the economy normalizes and the momentum weakens, various risk factors may emerge. These include the intensification of U.S.-China conflicts. The dollar value is expected to form a bottom rather than decline further throughout the year, and U.S. long-term interest rates are expected to rise only moderately.