DB Securities: "US Rate Cut Likely a Recession Cut... Risk Management Needed"

On September 15, DB Securities assessed that if the United States proceeds with an interest rate cut, it is likely to be closer to a "recession cut" rather than an "insurance cut," emphasizing the need for risk management.

An insurance cut refers to a preemptive rate reduction implemented to prevent risks before an economic downturn occurs. In contrast, a recession cut is a reactive measure taken after an economic slowdown has already begun.

Kang Hyunki, a researcher at DB Securities, stated, "If the Federal Open Market Committee (FOMC) of the United States implements a rate cut this week, it would not be unreasonable to call it a recession cut rather than an insurance cut," adding, "The reason the Federal Reserve's need to lower rates has been raised is due to instability in their labor market."

AP Yonhap News

The U.S. Department of Labor significantly revised down new employment figures for May and June in its July jobs report this year. In its August report, it further corrected the data to show a decrease in jobs in June. Additionally, the average monthly increase in new jobs from April 2024 to March 2025 was sharply reduced from 147,000 to 71,000.

Researcher Kang emphasized, "I cannot shake off suspicious questions regarding the current movements in the stock market," and added, "I feel considerable anxiety about the recent stock market behavior that interprets a recession cut as an insurance cut." He further noted, "Such errors are eventually corrected."

He continued, "From an investment strategy perspective, I believe it is desirable to focus on risk management," and recommended dividend stocks from a relative return perspective. He explained, "Dividend stocks tend to be resilient during periods of increased market volatility. Their relative performance is strong during interest rate cuts, and their popularity is expected to rise in the second half of the year, which investors should take advantage of."