Oil Price at $100 Crisis Trump Can't Stop

When oil prices fall, worries about a recession grow; when they surge, they trigger increases in bond yields. Rising bond yields have a critically negative impact on the stock market, which is classified as a non-safe asset.

WTI crude oil prices recently surged by 8%. Typically, when geopolitical risks emerge, an initial surge of 8-10% occurs, giving investors time to react. However, this time the increase was gradual, rising 1-2% daily, making it difficult for investors to respond. This caused investors to become complacent with the thought, 'Surely it won't go up further after rising this much?'

When oil prices surge, investors holding short positions in crude oil or Brent crude face increasing losses. To protect against these losses, they purchase physical crude as an alternative asset, further fueling the oil price increase. This resulted in an overshooting phenomenon where commodity prices that should have risen by only 2-3% surged by 7-8%. This situation has already surpassed technical response levels, making a further decline difficult.

The poor performance of chipmaker companies, with the Philadelphia Semiconductor Index falling 2.66%, is critical for domestic investors. However, the US Nasdaq index is generally consolidating rather than experiencing an overall decline. This is because other sectors, such as software-related companies, partially offset the chipmakers' slump overnight. It appears to be a sector-specific rotation rather than a general tech stock downturn.

Many investors have a strong inclination to act only after confirming major economic and diplomatic events.

Two recent key economic indicators showed offsetting trends. The Producer Price Index (PPI) exceeded expectations, suggesting that inflation pressure may continue. Conversely, unemployment benefit claims were higher than anticipated, acting as a positive signal that could alleviate pressure for interest rate hikes. However, with oil prices exceeding $100, it is clear that next month's PPI and CPI will rise, diminishing the significance of current indicators.

Despite rising oil prices, traditional energy-related stocks like ExxonMobil and Chevron saw limited gains. This suggests that investors are either factoring in potential oil-related remarks from President Trump over the weekend or perceive the oil price surge as an overshooting due to short position liquidations, thus exercising caution. Therefore, it is difficult to conclude that the current oil price surge fully reflects an actual increase in market energy demand.

Oil price increases are not immediately reflected in the market; it takes time for them to propagate from raw materials to intermediate goods and then to final goods. This is called the spread, and the actual economic impact of oil price increases appears with a time lag.

Particular caution is needed when bond yields do not keep pace with falling oil prices. Rather than focusing on domestic consumption data, observing the spread gap can help predict market direction.

Attention should be paid to what President Trump will say about the surging oil prices. Currently, agricultural fields in the US are experiencing diesel shortages, and Europe has failed to secure gas for the winter, leading to LNG prices doubling. In this situation, investors need to re-evaluate their strategies, moving beyond an obsession with tech stocks and considering energy-specialized sectors like LNG in their portfolios.

The conflict between the US and Iran has disrupted normal operations in the Strait of Hormuz, and clashes between Saudi Arabia and Houthi rebels have blocked the Red Sea route. This has made maritime logistics impossible, and switching to land transport significantly increases costs, creating a situation where 'the cure is worse than the disease.' In such a global supply chain crisis, a strategy of broadening investments into renewable energy and secondary batteries is necessary.

This can positively impact stocks related to renewable energy and ESS. The direction of Tesla's stock price can be used as an indicator for energy storage device-related stocks.

Prior to the oil price surge, experts anticipated an interest rate freeze, but due to the sharp rise in oil prices, the dominant opinion is that portfolios should be managed with the possibility of an interest rate hike in mind. This situation deepens investors' concerns about portfolio management.

If foreign investor supply improves by mid-to-late trading, maintain existing holdings. However, if foreign selling intensifies, consider reducing holdings by 10-15%. This is proposed as a partial response strategy for risk management.

More serious than growth stocks and tech stocks is the US administration's debt burden. Due to massive debt, the proportion of interest payments in budget allocations surges, shrinking normal administrative functions. The possibility of bond yield pressure was even mentioned during the Trump administration.

The surge in short-term and long-term bond yields has already been reflected in the market and is beyond the scope of effective response. Based on already priced-in negative factors, market stabilization is expected next week. Therefore, rather than overreacting at this point, it is advised to observe the market and hold steady.

The US administration is exploring alternative liquidity strategies instead of imposing tariffs that could create global hostility and economic crisis. For example, delaying copper tariff imposition caused price drops for related companies. As a second strategy, they aim to quickly pass the 'Clarity Act' to induce virtual assets like Tether into purchasing government bonds, thereby securing liquidity. This bill is expected to play a significant role in channeling funds from the virtual asset market into the bond market.

For Samsung Electronics stock, maintaining price support at the 250,000-260,000 won level is crucial. Rather than rashly trying to 'catch a falling knife' during the morning, it is a wise strategy to observe the market trend next Monday. Thoroughly check the supply and demand trends of foreign and institutional investors, as well as the potential use of treasury stock cards, before responding.