Stock Market Bound to Fluctuate Within a Box This Week... Invest in a Basket of 2nd Battery, Automobile, and Semiconductor Stocks

[Asia Economy Reporter Lee Seon-ae] This week, the domestic stock market is expected to continue fluctuating within a range due to multiple events that could raise caution. Accordingly, investment advice suggests responding with a barbell strategy that includes both cyclical stocks and growth stocks in the portfolio.

According to SK Securities on the 25th, the current environment surrounding the stock market is not favorable. This is due to ① the spread of the COVID-19 Delta variant, ② a slowdown in economic recovery momentum, and ③ ongoing US-China conflicts.

The spread of COVID-19 delays the resumption of economic activities, but since there is already a learning effect, its impact on the stock market is limited. However, important events related to the other two factors are scheduled for this week. US Secretary of State Sherman will visit China from the 25th to 26th to hold talks with Foreign Minister Wang Yi. The progress on friction points between the two countries, including trade issues, and whether a US-China summit will be held are key points to watch during Sherman's visit to China.

The July Federal Open Market Committee (FOMC) meeting and debt ceiling negotiations are also important. Amid ongoing concerns about inflation, Federal Reserve Chairman Jerome Powell maintains that tapering is premature. Attention will focus on the Fed's judgment regarding inflation concerns, the timing of tapering, and the lowered expectations for economic activity resumption due to the spread of the Delta variant. The US federal government's debt ceiling suspension period also ends on the 31st. Currently, the debt ceiling is set at $28.5 trillion, and if Congress does not approve an increase or suspension, the government will be unable to pay bond interest. Dow Jones warned that if the debt ceiling is not raised, the US Treasury's funding will face difficulties in October or November. From a macro perspective, there are many burdensome events, raising caution.

Han Dae-hoon, a researcher at SK Securities, emphasized, "Ultimately, with many events that could raise caution scheduled, the stock market is expected to continue fluctuating within a range," adding, "It is necessary to respond with a barbell strategy that includes secondary battery and bio sectors among growth stocks, and semiconductor, IT components, and automobile sectors among cyclical stocks in the portfolio."