[Good Morning Stock Market] Trump’s First Trading Day Breeze, Rising Expectations for the Korean Market↑

Relief Over Tariff Policy
Stabilization in Exchange Rates and Bonds

After the inauguration of U.S. President Donald Trump, all major U.S. stock markets closed higher on the first trading day. This appears to be due to the easing of 'tariff fears' as no comprehensive tariffs were imposed on the first day of his presidency. The won-dollar exchange rate also fell to the 1430 won level for the first time in about a month, which is expected to have a positive effect on the Korean stock market.

On the 21st (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 44,025.81, up 1.24% from the previous trading day. The S&P 500 index also closed at 6,049.24, up 0.88%, and the Nasdaq Composite Index rose 0.64% to 19,756.78. The Russell 2000 index, which focuses on small and mid-cap stocks, rose 1.85% to close at 2,317.94. This seems to reflect relief that Trump's tariff policy will not be as harsh as expected.

In fact, although President Trump signed several executive orders on his first day in office, the comprehensive tariffs promised during the election campaign were not included. Trump stated the day before, "We are considering imposing a 25% tariff on Mexico and Canada starting next month," but added, "A 'universal tariff' is not yet ready." Earlier, during the presidential campaign, Trump had pledged to impose a universal tariff of 10-20% on all imports and an additional 60% tariff on Chinese products. This situation led to a weaker dollar, causing the won-dollar exchange rate to drop to the 1430 won level for the first time in about a month. The 10-year U.S. Treasury yield also traded below 4.6%, easing inflation concerns.

The fortunes of individual stocks diverged. In particular, major technology companies showed contrasting performances. Tesla fell more than 4% intraday on news that electric vehicle subsidies would be eliminated under the second Trump administration but narrowed its losses to close down 0.57%. Nvidia's stock rose 2.27% that day, reclaiming its position as the largest market capitalization company. On the other hand, Apple, the largest by market cap, saw its stock drop 3.2% after investment bank Jefferies downgraded its rating from 'hold' to 'underperform.' Uncertainty appears to have increased amid poor sales of the new iPhone and successive target price cuts.

The domestic stock market is expected to show stability. The MSCI Korea Stock Market Exchange-Traded Fund (ETF) already closed up 1.55%. The MSCI Emerging Markets ETF also closed up 1.07%. The Philadelphia Semiconductor Index rose 1.29%, which is expected to have a positive impact on the domestic market. Considering the stabilizing effect on the exchange rate as well, a smooth start is anticipated.

Han Ji-young, a researcher at Kiwoom Securities, said, "With expectations of Trump's tariff restrictions, the Nasdaq's strength, and declines in the dollar and interest rates, a positive start is expected due to the U.S.-originated tailwind." She added, "From an industry perspective, expectations for Trump's investment in artificial intelligence (AI) infrastructure and the revitalization of the space industry in the U.S. are likely to create a favorable supply-demand environment for domestic related stocks such as AI and aerospace stocks." She further noted, "Considering Netflix's stock surged over 10% in after-hours trading, related technology and content stocks are also likely to attract short-term market attention."