Volatile Stock Market, Stable Stock Portfolio Recommended... US Consumer Prices as a 'Variable'

[Asia Economy Reporter Ji Yeon-jin] As concerns over tightening by the U.S. Federal Reserve (Fed) grow, investors in the recent stock market have become more sensitive to corporate earnings. While market volatility may ease after the super week focused on U.S. Big Tech earnings announcements, there is a forecast that extreme stock differentiation and increased market volatility could reoccur ahead of next month's U.S. Federal Open Market Committee (FOMC) meeting.

According to Mirae Asset Securities on the 5th, investors are advised to continue adjusting their stock portfolios toward greater stability. For growth stocks, it is recommended to selectively compress stocks with price-to-earnings ratios (PER) that are not too high or those expected to experience rapid declines. Attention should also be paid to the Shanghai Containerized Freight Index, which has fallen for three consecutive weeks, signaling an economic slowdown.

Hee-chan Park, a researcher at Mirae Asset Securities, pointed out, "The U.S. January consumer price index to be confirmed next week (February 7 to February 11) is likely to remain at a burdensome level," adding, "With the recent continued rise in international oil prices, there is an increasing risk that inflation concerns for February and March and the March FOMC will be triggered."

The recently released U.S. January Institute for Supply Management (ISM) manufacturing index fell for the fourth consecutive month to 57.6%, marking the lowest level since March 2020. New orders dropped to 57.9% (previously 61.0%) and the production index to 57.8% (previously 59.4%), falling to the lowest level since June 2020. The backlog of orders index also declined to 56.4% (previously 62.8%).

On the other hand, the prices index rose again to 76.1% (previously 68.2%) due to the significant impact of rising raw material prices, and the employment index slightly rebounded to 54.5% (53.9%).

The January ISM services index (59.9%) also recorded its lowest level since February last year. The business environment/production index dropped sharply to 59.9% (previously 68.3%), and new orders fell to 61.7% (previously 62.1%), with the employment index decreasing to 52.3% (previously 54.7%). The supplier deliveries index rose to 65.7% (previously 63.9%), indicating that supply chain disruptions have yet to be resolved. The services prices index slightly declined to 82.3% (previously 83.9%) compared to the previous month but still remained at a very high level above 80%, suggesting a steep rise in service prices.

The Eurozone's fourth-quarter gross domestic product (GDP) increased by 0.3% quarter-on-quarter, falling short of expectations. Year-on-year, it rose by 4.6% (expected 4.6%, previous 3.9%), but this is analyzed as reflecting the impact of strengthened economic lockdowns due to the spread of Omicron.

South Korea's January export growth rate year-on-year (15.2%) recorded the lowest level since February last year. January imports increased by 35.5% year-on-year, maintaining a high growth rate above 30% for ten consecutive months. Researcher Park stated, "With imports increasing more than exports, the January trade balance recorded a deficit of -4.89 billion dollars, the largest ever, marking a deficit for two consecutive months," adding, "There is a high possibility that the deficit will continue in February as well."