[Good Morning Stock Market] US Presidential Election Caution... Continued Positive Impact of Financial Investment Tax Abolition

[Image source=Yonhap News]

On the 5th, the domestic stock market is expected to show strength due to the possibility of abolishing the financial investment income tax (금투세). However, the upward trend is not expected to be significant amid cautious sentiment ahead of the U.S. presidential election.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 41,794.60, down 257.59 points (0.61%) from the previous session. The S&P 500 index fell 16.11 points (0.28%) to 5,712.69, and the Nasdaq Composite dropped 59.93 points (0.33%) to 18,179.98.

The New York stock market closed lower as cautious sentiment deepened ahead of the U.S. presidential election, which is expected to be a tight race between the two candidates, and profit-taking selling emerged mainly in large technology stocks.

According to foreign media, as of the 1st, Harris holds a narrow lead in battleground states such as Michigan (about 1 percentage point) and Wisconsin (less than 1 percentage point), and is tied with Trump in Nevada. Trump leads slightly in battleground states compared to Harris, including Pennsylvania (less than 1 percentage point), North Carolina (about 1 percentage point), Georgia (2 percentage points), and Arizona (3 percentage points).

A stock to watch is Palantir. After the market closed, Palantir reported earnings that surpassed expectations, leading to a sharp rise in after-hours trading. Palantir, a beneficiary of artificial intelligence (AI), recorded revenue of $725 million, exceeding the consensus estimate of $703 million. Analysts interpret Palantir’s earnings as a reaffirmation of the robust overall demand for AI.

The domestic stock market on the previous day started lower due to mixed results from U.S. employment data and the Institute for Supply Management (ISM) new orders, as well as uncertainty surrounding the presidential election. However, it rebounded sharply, closing with a strong gain, supported by growing expectations for the abolition of the financial investment income tax, a reversal of the Trump trade, and positive comments from Jensen Huang, CEO of Nvidia, regarding high-bandwidth memory (HBM).

On this day, the domestic stock market is expected to see strength in growth stocks and small- and mid-cap stocks due to expectations for the abolition of the financial investment income tax and a decline in U.S. interest rates. However, cautious sentiment surrounding the U.S. presidential election is likely to limit the index’s rise.

Han Ji-young, a researcher at Kiwoom Securities, said, “One reason the domestic stock market surged mainly in the KOSDAQ yesterday is that the Democratic Party, which had previously expressed a negative stance on abolishing or postponing the financial investment income tax, recently shifted to agree to abolish the tax considering the difficult market environment.” He added, “This has created expectations that the domestic stock market’s underperformance and sluggish trading volume compared to other major countries’ markets since August will be resolved.”

He continued, “However, cautious sentiment ahead of major events this week, such as the U.S. presidential election and the Federal Open Market Committee (FOMC) meeting, as well as concerns about the slowdown in KOSPI earnings growth during the ongoing third-quarter earnings season, have limited trading activity. Ultimately, a recovery in stock prices accompanied by a higher level of trading volume than currently seen is expected to occur after the election and the FOMC meeting.”