[Good Morning Stock Market] KOSPI Shows Sector-Differentiated Trends... Volatility Inevitable

On the 7th, the KOSPI is expected to experience a highly volatile market situation with sectoral differentiation depending on the outcome of the U.S. presidential election. Amid concerns about inflation, there are forecasts that the pace of interest rate cuts may be slower than expected, and the Federal Open Market Committee (FOMC) results are also likely to impact the domestic stock market. Experts predict that the domestic stock market will remain in a box range until early next year when the U.S. cabinet formation is completed and the actual policy direction becomes clear.

[Image source=Yonhap News]

On the 6th (local time), the U.S. New York stock market surged about 3%, hitting an all-time high. This was interpreted as investor sentiment significantly reviving due to the removal of uncertainty over the U.S. presidential election and expectations for pro-business policies.

On that day, the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 43,729.93, up 1,508.05 points (3.57%) from the previous trading day. This was the first time in two years since November 2022 that the Dow Jones rose more than 1,000 points in a single day. The S&P 500, focused on large-cap stocks, rose 146.28 points (2.53%) to 5,929.04, and the Nasdaq, centered on tech stocks, gained 544.29 points (2.95%) to close at 18,983.47. Thus, all three major indices set new all-time highs.

Trump beneficiary stocks surged in the market. Tesla jumped 14.75%, and DJT, the operator of the social networking service (SNS) Truth Social owned by former President Donald Trump, rose 5.94%. Bank stocks also showed strength. JP Morgan surged 11.51%, while Bank of America (BoA) and Wells Fargo jumped 8.4% and 13.11%, respectively.

The previous day, the domestic stock market also showed a Trump trade trend. The Trump trade refers to the phenomenon where investment funds flow into assets expected to benefit from Trump's re-election.

On the previous day, the KOSPI closed at 2,563.51, down 13.37 points (0.52%) from the previous trading day. The index opened at 2,591.90, up 15.02 points (0.58%) from the previous day, showing mixed movements within a narrow range in the early session before widening losses in the afternoon.

Han Ji-young, a researcher at Kiwoom Securities, said, "The domestic stock market showed weakness reflecting Trump's election, with sectors benefiting from Trump such as defense, finance, and machinery rising, while sectors related to the Harris trade, such as secondary batteries and renewable energy, sharply declined," adding, "A clear Trump trade market is emerging."

On this day, the KOSPI is expected to show different sectoral trends due to former President Trump's election victory. There are also forecasts that the KOSPI will remain in a box range until the first quarter of next year.

Park Seung-young, a researcher at Hanwha Investment & Securities, said, "The KOSPI is expected to stay in a box range until the first quarter of next year. Since adjustments to earnings expectations for next year seem necessary, cautious approaches are recommended until this is finalized," and analyzed, "Future leading sectors will be derived from the intersection of eco-friendly, reshoring, and China sanctions. With Trump's election, investments by domestic companies in the U.S. will become more concrete, and among them, there will be leading stocks."

DS Investment & Securities stated, "Korea is expected to show relative weakness as capital outflows continue amid fundamental sluggishness," and recommended, "Differential approaches should be taken focusing on sectors related to the U.S. presidential election and value-up."

The results of the FOMC meeting held over two days from the 6th to the 7th are also expected to be a major variable affecting the domestic stock market.

Kim Ji-won, a researcher at KB Securities, said, "With Trump's re-election confirmed, the U.S. stock market rallied amid expectations that tax cuts and deregulation policies will have a positive impact on the stock market," but added, "However, the sharp rise in the dollar and Treasury yields due to renewed inflation concerns is expected to burden the domestic stock market." He continued, "There is also a possibility that the pace of rate cuts will slow down, so attention should be paid to the FOMC results early tomorrow. Interest should be focused on any mention of future monetary policy directions."