[Good Morning Stock Market] All Eyes on U.S. Inflation Data... 'Major Shareholder Capital Gains Tax' Debate Also Key

Jackson Hole Meeting of U.S. Fed Approaching
U.S. Itemized Tariffs and Domestic and Global Corporate Earnings Also Variables

This week’s release of U.S. inflation data is being cited as a key variable that could determine the direction of the market. Concerns are emerging that weak employment data, tariff policies, and the burden of high valuations could weigh on the U.S. stock market, which has been hitting record highs. In Korea, there are expectations that confusion could arise in the domestic stock market over the revision of the major shareholder capital gains tax law, with the legislative notice period set for August 14.

According to the New York Stock Exchange on August 11, major U.S. stock indices were generally strong last week. The Nasdaq index jumped 3.87%, while the S&P 500 index rose 2.43%. The Dow Jones Industrial Average increased by 1.35%.

Notably, the S&P 500 index has surged 28% since its April low. The price-to-earnings ratio (PER) based on expected earnings over the next 12 months has surpassed 22 times, marking the highest level in the past four years.

For this reason, there are forecasts that inflation indicators such as the Consumer Price Index (CPI) and Producer Price Index (PPI) for July, to be released on August 12 and 14, will be variables that could determine the direction of the market. If the inflation rate is higher than expected, the stock market, which is near all-time highs, could feel the pressure.

According to financial information provider FactSet, Wall Street analysts expect the core CPI for July to rise by 3% year-on-year. The figure for June was a 2.9% increase.

The release of the CPI and PPI is also expected to affect the outcome of the U.S. Federal Reserve’s Jackson Hole meeting, which will be held from August 21 to 23. Since this Jackson Hole meeting takes place ahead of the Federal Open Market Committee (FOMC) meeting in September, which is widely seen as having a high possibility of a rate cut, the statement following the meeting could provide clues about the direction of the FOMC in September and beyond.

The Alaska summit between U.S. President Donald Trump and Russian President Vladimir Putin, scheduled for August 15, is also being cited as a variable. If a ceasefire fails at this meeting, concerns over geopolitical risks could increase market volatility.

The fact that the market has entered a traditionally weak period is also a burden. Over the past 35 years, the average returns for the S&P 500 in August and September have been -0.6% and -0.8%, respectively, making them the weakest months of the year. Michael Wilson, a strategist at Morgan Stanley, warned, “If weak employment and tariff-driven inflation concerns coincide, a correction could occur in the third quarter,” but added, “We will buy during corrections,” maintaining a medium- to long-term optimistic outlook.

The Korean stock market is expected to remain range-bound, influenced by factors such as Trump’s itemized tariffs, U.S. inflation indicators including the July CPI and August inflation expectations, major real economy indicators such as retail sales and industrial production in the U.S. and China, and domestic and overseas corporate earnings. In addition, tax reform proposals such as the major shareholder capital gains tax, which triggered the stock market crash on August 1, are also key issues.

Han Ji-young, a researcher at Kiwoom Securities, explained, “Political circles are proposing various compromise plans to raise the major shareholder capital gains tax threshold from 1 billion won to 2?3 billion won or even 5 billion won, which is having a calming effect on the stock market. However, since the government remains cautious and is leaning toward maintaining the original plan, ongoing discussions until the legislative notice period could cause confusion in the stock market.”