Relief at Jackson Hole Meeting... Stock Market Recovery Possible Amid Economic Indicator Watch

US 10-Year Treasury, Yuan, and Won Weakness Pressure Eases
Higher Probability of January FOMC Rate Hike... Inflation and Employment Data Results Crucial

The stock market is showing strength as it shakes off uncertainty following the smooth conclusion of the Jackson Hole meeting. Going forward, the market is expected to show a recovery trend while monitoring economic indicators.

As of 9:30 a.m. on the 28th, the KOSPI was up 0.52% from the previous session at 2532.25, and the KOSDAQ was up 0.45% at 903.45.

Last year, Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), delivered hawkish (favoring monetary tightening) remarks at the Jackson Hole meeting, which shocked the stock market, raising tension ahead of this year's meeting. However, Powell's remarks were evaluated to be in line with expectations, leading to market relief. As a result, the New York stock market closed higher on the 25th (local time).

Han Ji-young, a researcher at Kiwoom Securities, said, "From the stock market perspective, it is disappointing that the inflation target, which was a positive factor the market hoped for, was not raised at this Jackson Hole meeting. However, the fact that the possibility of prolonged high interest rates through an upward revision of the neutral rate, which was a negative factor of concern, has been eliminated can be seen as a relief factor." She added, "At last year's Jackson Hole meeting, the shock of mentioning that growth would be sacrificed in the process of controlling inflation caused the market to test new lows until the end of September, but this time, Powell's hawkish remarks were within market expectations, which had a positive effect on the U.S. stock market."

There is an evaluation that the mere resolution of uncertainty is positive for the stock market. Cho Chang-min, a researcher at Yuanta Securities, said, "The gap between the highest and lowest KOSPI index last week was 39.6 points, which was the second-lowest level on a weekly basis since the beginning of the year," adding, "The caution surrounding the Jackson Hole meeting was the biggest factor limiting the market flow last week, and considering that it ended without any major surprises, the resolution of uncertainty itself is positive for the stock market."

However, the rising trend in the 2-year Treasury yield and the increased possibility of a rate hike in November remain burdensome factors. After the Jackson Hole meeting, the U.S. 10-year Treasury yield, which had been weighing on the stock market, remained steady, but the 2-year Treasury yield surpassed 5.09% intraday, hitting the highest level since 2006. Lee Kyung-min, a researcher at Daishin Securities, explained, "The continued rise in the 2-year Treasury yield and the persistent strength of the dollar are burdensome, but the calming pressure on the U.S. 10-year Treasury, yuan, and won, which had stimulated volatility in global and KOSPI markets, will have a greater influence for the time being." He added, "If the rise in the 2-year Treasury yield and the dollar eases, the stock market's rebound momentum will strengthen."

It seems necessary to pay closer attention to upcoming economic indicators, as the Fed's rate path could change depending on them. Han Ji-young said, "Following the Jackson Hole meeting, the consensus forecast for the September Federal Open Market Committee (FOMC) rate hold has been maintained, but the November FOMC consensus has shifted from a hold to a hike, which could be a burden," adding, "It is appropriate to keep the possibility open that probabilities may change frequently before each FOMC meeting depending on incoming data and to respond accordingly."

This week, the release of U.S. July core Personal Consumption Expenditures (PCE), August nonfarm payrolls, unemployment rate, and other inflation and employment indicators are expected to impact the stock market. Lee Kyung-min said, "Key economic indicators from major countries are scheduled to be released this week, and the results will determine the rise and fall of global markets including the KOSPI," diagnosing, "It is important to see whether the slowdown in U.S. economic momentum and the easing of concerns about the Chinese economy occur." He added, "Although fluctuations are inevitable during the process of confirming economic indicators, the KOSPI is expected to surpass the 2540 level and enter a stable zone this week."