[MarketING] How to Respond to the Market After the Holiday? ... Volatility Caution Needed on the 31st

The stock market will enter a long holiday break this week (January 27-31) due to the Lunar New Year holiday. While the domestic stock market will be closed for four days except for the 31st, major overseas events that could impact the stock market, such as the U.S. Federal Open Market Committee (FOMC) meeting, will take place. Therefore, it is necessary to establish response strategies considering these factors. In particular, on the 31st, when the market reopens after the long holiday, it is expected that both domestic and international issues during the closure period will be reflected simultaneously, so there is a need to prepare for volatility.

Yonhap News

Last week, the KOSPI rose by 0.53%, and the KOSDAQ increased by 0.56%. Ji-won Kim, a researcher at KB Securities, said, "Last week, amid mixed expectations and concerns about tariffs and policy uncertainties following President Donald Trump's inauguration, the KOSPI and KOSDAQ closed slightly higher." He added, "During this week's Lunar New Year holiday closure, the FOMC, European Central Bank (ECB) interest rate decisions, and earnings announcements from big tech companies such as Microsoft (MS) and Tesla are scheduled. As the results of these major events will be reflected all at once on the 31st, it is necessary to be cautious about the potential increase in volatility."

The market is expected to gradually shift its focus away from Trump's influence and concentrate on the financial market schedule. Kyung-min Lee, a researcher at Daishin Securities, said, "Trump's tariff policy, which was a major concern earlier this week, is generally evaluated as more moderate than the market feared, leading to a sense of relief in the market." He added, "The global financial market will gradually move away from Trump's influence this week and focus on the upcoming financial market schedule."

The most notable event is the January FOMC results released on the 30th. Kyung-min Lee said, "According to the Chicago Mercantile Exchange (CME) FedWatch tool, the probability of an interest rate hold is expected to be over 99%." He continued, "The key points are the assessment of the January core Consumer Price Index (CPI), which slowed for the first time in four months, and the content of Fed Chair Jerome Powell's press conference regarding Trump's policies." He added, "The current market consensus for rate cuts this year (average of securities firms' forecasts) is still one cut, which is more hawkish than the Fed's dot plot (two cuts). Considering that the hawkish stance of the December FOMC has already been priced in, the market impact of the Fed's hawkish stance will be limited. However, the market's sensitivity to dovish interpretations of Powell's comments is expected to increase."

On the 31st, the December U.S. Personal Consumption Expenditures (PCE) price index will be announced. Lee said, "The market consensus expects a 2.5% year-on-year increase for December, rebounding from 2.4% in the previous month. If the December CPI and Producer Price Index (PPI) also fall short of expectations, market sentiment for disinflation will recover, and normalization of monetary policy consensus will be possible."

The U.S. fourth-quarter Gross Domestic Product (GDP), to be released on the 30th, is expected to show growth of 2.6%, slowing from the previous quarter's 3.1%. This slightly exceeds the Fed's 2024 growth forecast of 2.5%.

Earnings announcements from big tech companies will also continue. On the 30th, MS, Meta, Tesla, and Qualcomm will report, followed by Apple, Amazon, and several other big tech firms on the 31st. Lee said, "While meeting earnings consensus is important, it is also a key concern whether big tech companies will maintain their investment plans amid reduced policy uncertainty following the Trump administration's inauguration." He added, "Investment momentum is likely to be maintained due to the Trump administration's support policies for investments such as data centers."