CPI Exceeds Expectations, Market Decline Forecasted

The U.S. September Consumer Price Index (CPI) was announced above market expectations, as Yoo San-nam predicted. With generally poor economic indicators, the likelihood of a stock market decline has increased.

The market is expected to fall again after a short-term short covering. Yoo San-nam assessed that this CPI result is highly likely to have a negative impact on the market.

In his detailed CPI sub-indicator analysis, Yoo San-nam accurately predicted most items. However, different figures appeared in the electricity price and medical service sectors. In particular, the drop in electricity prices was pointed out as an unusual phenomenon.

Amid overall inflationary pressure, the fluctuations in these two items represent a peculiar trend. A detailed sub-indicator analysis confirmed the complexity of inflation factors.

On Friday, there is a high possibility of overnight position liquidation. Therefore, he diagnosed that a decline is natural if the market follows a normal trend.

This is interpreted as a situation where suppliers cannot pass on cost increases to consumers.

Whether this rise in grain prices will be transferred to consumer prices in the future is an important inflation observation point. It still shows that the speed of price transmission is slowing.

This phenomenon offers important implications for the overall price trend in the market. The pattern of price transmission across the entire supply chain is drawing attention.

Oracle's third-quarter revenue and earnings per share (EPS) exceeded expectations, showing solid performance. However, during the earnings call, uncertainty was raised regarding the timing of the free cash flow (FCF) turnaround to surplus.

The gross margin is trending down as infrastructure investment increases relative to the high-margin software segment. While AI investment demand is clear, the burden of large-scale capital expenditure (CAPEX) is pressuring operating profit.

In particular, if high interest rates persist, future funding costs are likely to increase, negatively impacting profits. This raises concerns about explosive growth momentum.

Energy prices, including gasoline, were identified as the biggest factor in the inflation rate. In addition, rising lodging and housing costs were cited as key warning signs. The analysis showed that the core consumer price index itself did not significantly change year-on-year.

The market showed a more sensitive reaction to the stability of bond yields than to the CPI figures themselves. This suggests that inflation indicators are influenced by complex factors.

In contrast, only 13 out of 48 Bloomberg experts (approximately 27%) responded with an interest rate hike.

The majority of experts see a higher possibility of an interest rate freeze, indicating a significant difference in opinion between market investors and experts.

This discrepancy increases uncertainty about the impact of the Federal Reserve's (Fed) future interest rate decisions on the market.

This suggests that bond market volatility is increasing like Bitcoin.

Given the relatively high current interest rates, long-term rates are expected to gradually decline.

This was judged to reflect a short squeeze-like movement in the market.

Institutions showed divided opinions on an interest rate freeze and also mentioned the possibility of an early cut next year.

Bloomberg experts offered opinions of 70% for a rate freeze, 27% for a hike, and 3% for a cut. There were also criticisms that the interpretation of the FedWatch Tool's rate hike probability might be distorted.

Adobe reported strong performance in Q3, with revenue increasing 13% year-over-year.

Overall positive results were announced, including an upward revision of the 2026 annual revenue target.

Currently, three GPT Pro subscription plans are operated to prevent account blocking.

It was mentioned that there is a risk of account blocking when using other AI tools like Claude. Efforts are being made for the stable operation of AI services.

Concerns have been raised that AI companies are not adequately controlling the speed of artificial intelligence development. It was mentioned that if this situation continues, AI could eventually threaten or even kill humanity.

The lack of safety regulations or legal controls relative to the speed of technological development is cited as a core risk factor. Calls for urgent ethical considerations and social control of AI development have emerged.

This suggests that memory capacity and speed are essential factors for improving artificial intelligence's intelligence.

In particular, HBM (High Bandwidth Memory) demand is directly related to strengthening AI's long-term memory capabilities. The development of long-term memory technology has emerged as a key factor determining AI performance.

Future AI technology development is expected to be closely linked to innovations in memory technology. The importance of the high-performance memory semiconductor market is further increasing.

Instead, a reduction in Treasury bond issuance, i.e., budget cuts, was mentioned as the fundamental way to lower interest rates.

Institutions view RRR as a liquidity regulation tool, suggesting it's difficult for it to directly impact interest rate cuts. Therefore, changes in the Treasury's fiscal policy are considered more important.

The Democratic Party revealed that it is seriously considering a plan to directly provide $5,000 to citizens. Budget adjustment procedures for funding this policy are under discussion.

This cash support policy raised concerns about increasing the burden of government bond issuance and expanding the fiscal deficit. The market is more wary of long-term upward pressure on interest rates than short-term consumption stimulus effects.

Excessive fiscal spending risks re-igniting inflation, requiring a cautious approach. Discussions on the feasibility and side effects of the policy are active.

Kevin Warsh's remarks and President Trump's movements are also variables that will influence the Fed's decision.

With current market interest rates at 4.93% already reflecting a tightening effect, the Fed is more likely to prefer freezing rates rather than delivering a greater shock to the market.

It is expected that when the war ends, fiscal spending will decrease and government bond yields will also fall.

In particular, easing inflation through lower oil prices will be key to market recovery. Geopolitical risks are expected to significantly reduce economic uncertainty once resolved.

Currently, international oil prices remain high due to geopolitical instability. The end of the war is expected to have a decisive impact on oil price stability.

Overall, he emphasized that geopolitical stability and lower oil prices will be crucial turning points for the market.

Yoo San-nam stated he did not predict this stock movement.

It was analyzed that the response of 'don't know' regarding the timing of future profitability during the earnings call acted as a negative factor for the market. Investors judged that Oracle's debt issues could not be ignored.

Guidance that did not meet market expectations was cited as the main reason for the stock price decline. This is a result of concerns about the company's financial health being reflected in the stock price.

Both market experts and institutions widely expect the Federal Open Market Committee (FOMC) to freeze interest rates. If a rate freeze is decided, it could be interpreted as the Fed tolerating current inflation levels.

A U.S. interest rate freeze is expected to be a positive factor for the Bitcoin and gold markets. However, the possibility of a Japanese interest rate hike and the U.S. government's fiscal deficit remain important variables.

These complex factors are expected to determine future market trends. Different reactions are anticipated for each asset class.

Therefore, how much the rate freeze decision has been pre-priced into the market is important, and whether inflation is tolerated is a key observation point.

When bond yields fall sharply, stock indices can rise more significantly than TLT.

Conversely, if bond yields remain high, TLT falls less than stock indices, showing less volatility. This suggests that the two asset classes have different risk-reward characteristics.

Investors should formulate an appropriate asset allocation strategy based on their risk appetite and market outlook. Understanding the difference in MDD (Maximum Drawdown) for each asset is crucial.

The September CPI figures were worse than market expectations. Nevertheless, the market rose not because of the CPI results, but due to a short squeeze phenomenon in the bond market.

It was analyzed that a large-scale short covering in the bond market drove the rise in the stock market. Therefore, the current stock price increase was stated to be not directly related to the CPI figures.

This shows that short-term market movements can be influenced by specific supply and demand factors rather than fundamental economic indicators. It was emphasized that various market factors should be considered when making investment decisions.