Focus on ESS and High-Dividend Stocks, What Are the Key Indicators for September?

Expert Park Ji-hoon identified Energy Storage Systems (ESS) as the only sector currently showing a clear U-shaped turnaround in the market. He noted that US ESS installations increased by 78% year-on-year, contrasting sharply with the continuous negative growth (-20%) in electric vehicle sales. He emphasized that ESS is thus securing independent growth momentum, separate from electric vehicles.

The earnings consensus for secondary battery sector companies, which has been downgraded for three consecutive years, is expected to turn upward starting from Q1 2026. Expert Park Ji-hoon analyzed that this could be a significant turning point where the market begins to positively re-evaluate the future growth potential of secondary battery companies. He suggested that these changes are not unrelated to the growth of the ESS sector.

Expert Park Ji-hoon explained that there is a difference in investment strategies between Samsung SDI and LG Energy Solution. Samsung SDI tends to focus its investments on the growth potential of the ESS business, while LG Energy Solution makes comprehensive investments across the entire secondary battery value chain. He advised that investors should understand purchasing Samsung SDI as an investment in the ESS sector, and purchasing LG Energy Solution as an investment in the entire secondary battery value chain. He added that it is important to recognize these differences when making investment decisions.

Expert Baek Chan-gyu emphasized the key economic indicator schedule for the September market. In the first week of September, US non-farm payrolls and unemployment rates will be announced, which are crucial indicators for assessing the health of the labor market. Following this, in the third week of September, the Federal Open Market Committee (FOMC) meeting will be held to decide on interest rates and release the dot plot. Expert Baek Chan-gyu predicted that these indicators will significantly influence the market's direction and urged investors to be cautious.

The current market is heavily influenced by two variables, oil prices and interest rates, rather than earnings. Expert Baek Chan-gyu analyzed that rising oil prices due to escalating conflicts are fueling inflation, which in turn leads to interest rate hike pressure, negatively impacting the market. He explained that this situation dilutes earnings expectations and increases market volatility, emphasizing the need to closely monitor trends in oil prices and interest rates.

Expert Baek Chan-gyu provided specific figures regarding the impact of oil prices on the market. He explained that the market's direction is determined by an oil price of $80, with the market being relatively stable below $80 but entering a more difficult period above $80. He specifically warned that if oil prices rise to the $90 to $100 range, a significant shock could occur in the market, urging investors to be cautious.

Rising oil prices significantly impact stock market valuations. Expert Baek Chan-gyu explained that an increase in oil prices causes inflation, which in turn leads to upward pressure on interest rates, causing the 10-year Treasury yield to rise. This increases the denominator, representing the risk-free interest rate in the stock valuation formula, thus exerting downward pressure on stock prices. He analyzed that while expectations for corporate earnings remain, increased volatility in oil prices and interest rates is raising uncertainty in the stock market.

Treasury yields of different maturities send various signals to the market. Expert Baek Chan-gyu explained that the US 2-year Treasury yield most significantly reflects changes in inflation and the Federal Reserve's benchmark interest rate. In contrast, the US 10-year Treasury yield is used as a comprehensive indicator reflecting not only inflation and interest rates but also long-term growth. He added that the longest maturity, the 30-year yield, solely reflects the market's expectations for long-term growth.

Currently, corporate credit risk remains at a relatively stable level. Expert Baek Chan-gyu assessed that investment-grade corporate bond (IG) and high-yield spreads are stable, with risk levels significantly lower compared to the 2022 Legoland crisis or the 2023 Silicon Valley Bank (SVB) incident. He believes that the environment for companies to generate profits and raise funds for investment is relatively favorable, and he judges that risk has not yet spread to the real economy. This could be a reason to guard against excessive market anxiety.

Regarding the future economic outlook, expert Baek Chan-gyu advised that while a short-term market recovery is possible, economic expectations should be adjusted more conservatively for the first half of next year. He pointed out that the rise in the Baltic Dry Index (BDI) could lead to cost pass-through in 6-9 months, and he expects a rotation market to continue until the end of the year. Therefore, investors should prepare for a rotation market and potential recovery until the year-end, but consider a portfolio strategy reflecting lower economic expectations for the first half of next year.

Expert Baek Chan-gyu emphasized the need to focus on high-dividend stocks in the current volatile market. He explained that with increasing market uncertainty, a strategy of pursuing stable returns through consistent dividends is effective. He added that companies securing a safety margin through share buybacks and dividends can be good investment alternatives to overcome volatility. This is interpreted as a strategy that prioritizes the stability and profitability of individual companies over broader market trends.

The key drivers of Return on Equity (ROE) are changing year by year. Expert Baek Chan-gyu analyzed that in 2023, due to high interest rates making debt financing difficult, total asset turnover was the most important factor. For 2024, as interest rate hikes stagnate, the profit margin relative to sales is expected to become more critical. And for 2025, with interest rate declines anticipated, companies with somewhat higher financial leverage, meaning more debt, could also become attractive investment options. This implies the need for investment strategies tailored to the economic environment of each year.

Expert Baek Chan-gyu emphasized the need to focus on 'total asset turnover' during the current period of interest rate hikes. This is because, in a situation where interest rates are soaring, companies with high financial leverage begin to be shunned by the market. He explained that it is important for investors to identify companies with strong sales, i.e., those with high total asset turnover. This means that the ability to efficiently utilize assets to generate sales becomes a key indicator for evaluating a company's value.

Expert Baek Chan-gyu warned that chasing stocks in a rotation market is risky. This is because the rotation cycle is short, and investors who chase already risen stocks are highly likely to buy at a short-term peak. He pointed out that chasing stocks can lead to a depletion of investment accounts, emphasizing that this is practically an impossible strategy. Instead, he recommended investing evenly across various stocks and using a fractional selling strategy when a profit of around 5-6% is achieved.

Expert Baek Chan-gyu suggested utilizing monthly dividend ETFs and index-linked ELS to ensure portfolio stability in a highly volatile market. He stated that securing steady cash flow through monthly dividend ETFs tracking stable indices like the US Dow Dividend Growth, and mitigating volatility by using only index-linked ELS instead of individual stock-linked ones, is crucial. He added that avoiding stock-linked ELS, which are heavily dependent on the movements of specific stocks, and instead pursuing profits through option premiums with index-linked ELS, is a more advantageous strategy.

Expert Baek Chan-gyu proposed specific portfolio weightings for stable asset allocation. He emphasized that at least 30% of total assets should be allocated to stable assets like financial products to hedge risk. Of the remaining 70%, half (35%) should be invested in leading stocks such as AI infrastructure to respond to a rotation market, and the other 35% should be allocated to earnings-driven stocks with increasing sales and future value through fractional purchases. He projected that with this asset allocation strategy, sufficiently good performance can be expected until November 3rd, when policy momentum is maximized.