[Practical Finance] Diversified Investment Strategies for the Second Half with Increased Volatility

US Presidential Election Variables... Time to Lower Expectations and Increase Stability
Focus on Treasury Bonds, Real Estate REITs, and Japanese Listed Company ETFs
Biotech Sector Strengthens... Launch of Brain Disease Treatment ETF

Volatility in the capital markets has increased in the second half of this year. Although uncertainty regarding U.S. interest rate cuts has diminished, it remains difficult to gauge the impact of the U.S. presidential election results on the capital markets. Jaeseok Ha, a researcher at NH Investment & Securities, explained, "Uncertainties surrounding the U.S. presidential election, debates over an AI industry bubble, concerns about economic recession, and increased volatility of the yen are all expanding capital market volatility."

Amid ongoing external variables, domestic asset management industry experts have urged diversification of risk factors through the use of exchange-traded funds (ETFs). ETFs have lower fees and higher trading convenience compared to traditional public funds. Asset management companies are rapidly launching ETFs that reflect investor needs, providing a wide range of choices. Experts recommended not only bond ETFs, which tend to attract funds during interest rate cut periods, but also real estate REIT ETFs and ETFs investing in Japanese companies. Despite recent instability in the big tech stocks that have driven the U.S. stock market's rise, many experts emphasize the need to pay attention due to their still significant growth potential.

Jungjin Ahn, head of the ETF Consulting Team at Samsung Asset Management, stated, "Investing in U.S. ultra-long-term bond ETFs, which are expected to yield capital gains according to the U.S. interest rate cut cycle, is effective," adding, "Real estate REIT ETFs, which have a high correlation with the interest rate cycle, also tend to see price appreciation expectations when interest rates decline."

Yongsu Nam, head of the ETF Management Division at Korea Investment Management, advised, "The U.S. 30-year Treasury active ETF can directly benefit from interest rate cuts," and added, "Dollar-hedged strategies can also manage the risk of a weak dollar."

ETFs that invest in major companies leading the rise of the Japanese stock market were also highlighted as promising investment products. Chanyoung Kim, head of the ETF Business Division at KB Asset Management, noted, "The concentration on the 'Samurai 7,' which has demonstrated growth potential in the Japanese stock market, is accelerating," and expressed expectations that "as the yen is expected to gradually strengthen, global investors will pay more attention to these companies."

After Nvidia announced its Q2 earnings this year, enthusiasm for AI-related stocks cooled somewhat. However, experts believe the AI industry will grow over time and advise that related ETFs remain promising.

Kyeongjun Lee, head of Strategic ETF Management at Mirae Asset Global Investments, said, "Although there are recent concerns about an AI bubble, affordable AI technologies applicable to personal PCs and industrial sites are advancing," and predicted, "A productivity revolution driven by cheap and popularized AI will occur across all industries." He continued, "As AI demand explodes, the growth of money-making AI big tech companies will remain strong," urging, "Investors should select companies showing revenue growth and high profitability."

Ahn Jungjin emphasized, "U.S. AI power demand could surge 81-fold by 2030," and highlighted, "Regarding the U.S. presidential election, investments in power infrastructure receive bipartisan support, so policy benefits are expected."

Along with expectations of interest rate cuts, investment sentiment toward the biotech sector is improving. Markets for obesity and brain disease treatments are rapidly expanding. An ETF focusing on U.S. brain disease treatment developers was recently listed on the domestic stock market. Beomjin Seo, head of Strategic Solutions at Samsung Active Asset Management, analyzed, "With advancements in brain imaging technology and AI, we anticipate exponential growth in brain disease treatments."

The global population's life expectancy continues to rise. As aging accelerates rapidly, medical expenditures related to brain disease treatments are also surging. Degenerative brain diseases such as dementia see a sharp increase in incidence starting in the 60s. With brain disease treatments consecutively receiving approval from the U.S. Food and Drug Administration (FDA), the related market is expected to expand. There are forecasts that the dementia treatment market will grow elevenfold in five years.

As the number of people suffering from mental illnesses such as depression and schizophrenia increases compared to the past, social stigma toward prescriptions and medication for mental illnesses is decreasing. Improved safety of treatments compared to before is also positively influencing the growth of the treatment market.