[Good Morning Stock Market] "US Facing Mega Event... Domestic Stock Market Volatility Expected to Increase"

Volatility in the Korean stock market is expected to increase on the 4th. This is due to the upcoming U.S. presidential election and Federal Open Market Committee (FOMC) meeting, as well as the Standing Committee of the National People's Congress in China.

[Image source=Reuters Yonhap News]

On the 1st (local time), despite worsening employment data, the New York stock market showed an upward trend. The Dow Jones Industrial Average, centered on blue-chip stocks, closed at 42,052.19, up 288.73 points (0.69%) from the previous trading day. The S&P 500, focused on large-cap stocks, rose 23.35 points (0.41%) to 5,728.80, and the tech-heavy Nasdaq Composite increased by 144.77 points (0.80%) to close at 18,239.92.

The market rose despite the employment shock. The U.S. Department of Labor reported that nonfarm payrolls increased by only 12,000 in October compared to the previous month. This was far below economists' expectations of a 100,000 to 110,000 increase, leading to analyses describing it as an 'employment shock.' However, the market appeared to respond more to strong earnings from tech companies such as Amazon.

The domestic stock market is expected to experience volatility as the U.S. and China face major upcoming events. In the U.S. presidential election scheduled for the 5th, Republican candidate former President Donald Trump and Democratic candidate Vice President Kamala Harris are locked in a close race until the final moments. Additionally, the FOMC meeting is scheduled for the 6th and 7th. The market anticipates a rate cut by the FOMC.

Lee Kyung-min, a researcher at Daishin Securities, said, "Depending on the unpredictable outcome of the U.S. presidential election, fluctuations may continue," but added, "If the FOMC meeting reconfirms the rate cut cycle and expectations for China's economic stimulus and recovery are revived around the National People's Congress Standing Committee meeting from the 4th to the 8th, a market turnaround is quite possible."

Kim Ji-won, a researcher at KB Securities, also stated, "This week's U.S. presidential election is a major event that will determine the stock market trend, and with the outcome difficult to predict, increased volatility is inevitable until the results are confirmed." She added, "The FOMC meeting starting the day after the election is also a focus, with a 25 basis point (1bp = 0.01 percentage point) rate cut widely expected. Attention should be paid to the speech by Federal Reserve Chair Jerome Powell following the rate decision."

In the securities industry, it is advised to respond defensively rather than aggressively during such times. Kim Dae-jun, a researcher at Korea Investment & Securities, said, "Coincidentally, the U.S. presidential election and FOMC overlap, so regardless of the outcome, investors expect increased volatility." He added, "There is no need to make drastic changes to investment positions this week; it is not too late to act after confirming all results." He further emphasized, "It will be a week to focus solely on defense."