[Good Morning Market] Increased Desire for Profit-Taking... KOSPI Expected to Show Highly Volatile Price Movements

Uncertainty Stemming from Trump and Caution Over December CPI
Volatility Increases as Domestic Market Faces Limited Upside

On January 13, the domestic stock market is expected to show highly volatile price movements, influenced by increased uncertainty stemming from U.S. President Donald Trump and other factors.

On January 12 (local time), despite news that the Trump administration had launched a criminal investigation into Jerome Powell, Chair of the U.S. Federal Reserve (Fed), the three major New York stock indexes closed slightly higher. The Dow Jones Industrial Average ended trading at 49,590.2, up 86.13 points (0.17%) from the previous session. The S&P 500 index rose 10.99 points (0.16%) to 6,977.27, and the Nasdaq index gained 62.56 points (0.26%) to close at 23,733.9.

The New York stock market reacted sensitively after the Trump administration initiated an investigation into Powell that could lead to criminal charges. The allegations against Powell involve mismanagement of the Fed headquarters building renovation project and perjury before Congress. The market believes that President Trump is behind the criminal investigation, as he has repeatedly disparaged Powell as a "dummy" and pressured him for lowering the benchmark interest rate too slowly.

Jerome Powell, Chair of the U.S. Federal Reserve (Fed). Photo by Yonhap News Agency

However, market participants responded with cautious bargain buying, as Powell is not expected to step down immediately due to the investigation. Former Fed chairs and some Treasury Secretaries also issued statements supporting Powell and criticizing Trump, thereby strengthening Powell's position.

In this regard, Han Ji-young, a researcher at Kiwoom Securities, said, "This investigation into Chair Powell is unlikely to rapidly alter the Fed's monetary policy path or significantly disrupt the direction of the stock market," adding, "Ultimately, the stock market should focus on the U.S. December Consumer Price Index (CPI)."

The researcher explained, "If inflation rises to the 3% range, it would be appropriate to reflect the following scenario in the CPI response strategy: fading expectations for a rate cut within the year, a sharp rise in market interest rates, and a temporary increase in downward pressure on the stock market before the Magnificent 7 (M7) fourth-quarter earnings season."

Despite the news of an intraday rebound in the U.S. stock market, the domestic market is expected to remain highly volatile, with the upper end of the market limited due to Trump-related uncertainty and concerns over the December CPI. Although the KOSPI continues to hit record closing highs, volatility has increased, with wide price swings during the session, especially in semiconductor stocks.

The researcher noted, "Since the beginning of the year, the KOSPI (+9.7%) has recorded a higher rate of increase compared to other major markets, including the U.S. Nasdaq (+2.1%), Japan's Nikkei 225 (+3.2%), Germany's DAX (+3.7%), and China's Shanghai Composite (+4.9%), which has led to a greater desire for profit-taking as a result."

He further added, "Given the combination of continued daily volatility and seven consecutive days of gains, short-term fatigue has accumulated. Factors such as concerns over the December CPI and the won-dollar exchange rate surpassing the 1,460-won level again could trigger profit-taking, and this should be taken into account."