Hormuz Tensions Escalate, New York Stocks Fall

Following the Jackson Hole meeting, the forecast for a September rate hike surged from around 50% to nearly 70%. Surging oil prices and hawkish remarks from Chairman Wash are acting as macro pressures, leading to opinions that we have entered a phase where a rate hike cannot be ruled out. Park Myeong-seok stated, "The September rate hike forecast had originally gone up to about 50, right? But it's gone up to almost 70. So, in fact, it's largely shifted towards a rate hike." This situation has led to diverse interpretations among market participants regarding the direction of interest rate policy.

However, a change in this trend has recently been detected. The necessity of re-evaluating hardware stocks, whose cash-generating ability was not fully recognized, is being raised. Particularly, if a high-interest rate environment persists, there is a view that hardware stocks with solid cash flow may show a relatively more favorable performance. Park Myeong-seok explained, "The market was too harsh on hardware for the past three months, so the market that ignored cash generation too much, now that interest rates are a bit higher and if this doesn't collapse the market, then perhaps this side still has a living narrative, and so in a high-interest rate period, this side might show a more favorable performance." This is interpreted as reflecting the market's attention shifting from growth stocks to hardware, which has strong value stock characteristics, in a high-interest rate environment.

There is insufficient evidence to clearly measure the strength of their policy wills. Park Myeong-seok stated as his personal opinion, "From the perspective of whether Beesant is stronger or Wash is stronger, I personally think Beesant has a stronger will. In that case, the debasement trade will likely appear effectively quite often until the midterm elections, so we will need to keep watching." Although there are predictions that the debasement trade (buying certain assets based on expectations of interest rate cuts) will be effective until the midterm elections, there is insufficient confirmation regarding the strength of their policy wills.

The DRAM spot price has recently surged again, reaching 4-5 times the long-term supply contract price. This sharp rise in spot prices indicates a deepening shortage in the memory semiconductor market. Park Myeong-seok noted, "The DRAM spot price is said to be surging again recently. If you look at this, the spot price has gone up to four or five times the long-term supply contract price." Amidst this situation, news has emerged that Samsung Electronics is considering converting part of its Pyeongtaek foundry line to memory production. This is interpreted as a move to expand the production of high-profit memory semiconductors to meet market demand.

He believed that before the FOMC (Federal Open Market Committee) meeting, a bullish market could emerge as interest rate hike expectations weaken. Conversely, he also raised the possibility of selling pressure if asset purchases are not expanded after the FOMC. Han Sang-hee said, "I am advocating for a 'strong start, weak finish' in September." This forecast was presented along with an analysis that the temperature difference between the bond and stock markets would narrow during September. The market is expected to show volatility before and after the FOMC due to uncertainty in interest rate policy.

After the Jackson Hole meeting, there was a tendency in the market to interpret Chairman Wash's remarks as hawkish. However, Commissioner Han Sang-hee pointed out that after directly reviewing Chairman Wash's speech content, there was no significant change compared to previous hearings. He explained that the emphasis on combating inflation was at a fundamental level. Han Sang-hee said, "I was curious if that was really the case, so I read all the transcripts yesterday... I checked them against the transcripts, and they are slightly different, but there are no major changes," suggesting the possibility that the market might have overreacted based only on news headlines. This implies that the short-term market reaction might be a result of sensitivity to headlines rather than a genuine shift in the Fed's policy stance.

With the decline in the U.S. debt-to-GDP ratio, the justification for fiscal expansion is being secured. However, the future direction of fiscal policy could significantly change depending on the outcome of the midterm elections. Han Sang-hee stated, "If the Democratic Party wins both the House and the Senate in the midterm elections, for example, they will have very few things they can do. So from then on, for the next two years, will they perhaps try to spend less on our budget?" emphasizing the importance of election results. If the Democratic Party fails to secure a majority in both the House and Senate in the midterm elections, there could be a move to reduce fiscal spending for the next two years. Along with this, the possibility of an interest rate hike in December is also analyzed to be linked to the fiscal policy stance after the election.

Part-time employment continues to increase, and the economic activity participation rate shows a downward trend. Han Sang-hee pointed out, "Although the unemployment rate is actually low, whether the quality of employment is truly good is a question, but this aspect was not mentioned at all." There is also an analysis that the Fed selectively mentioning data could lead the market to misunderstand the employment situation. It is emphasized that the overall health of the labor market cannot be accurately judged solely by the unemployment rate.

An analysis suggests that the market's reaction after the Jackson Hole meeting was not due to a general decline caused by interest rate hike concerns, but rather due to fund movements between semiconductors and big tech. Han Sang-hee explained, "People think that the market fell last Friday after the Jackson reaction because it was hawkish... but it's correct to see it as money moving within the stock market, so that was the trend." This indicates that differentiated trends are appearing even within tech stocks by sector. The underperformance of a specific sector is interpreted as a result of funds moving to other sectors rather than a market-wide decline. Therefore, instead of simply viewing market movements as a decline, it is important to analyze internal fund flows.

He believes that the Fed should act as a result of economic conditions rather than dominating them. Park Byung-chang stated, "Chairman Wash doesn't like the Fed leading something. He wants the Fed to move as a result of something. He is very negative about the Fed dominating the economy and is someone who says the Fed's role should be reduced." Chairman Wash's stance is to reduce the Fed's role, and he appears to have a policy of minimizing direct Fed intervention through price stability.

The FOMC meeting is scheduled for September 15-16. If interest rates are not raised at this meeting and inflation is not brought under control, the next FOMC meeting will be held one week before the midterm elections. An analysis suggests that an interest rate hike just before the midterm elections could pose a very significant political burden. Park Byung-chang explained, "There's an FOMC on September 15-16, and if they don't raise rates then, but inflation isn't caught, the next FOMC is a week before the midterm elections. If they have to raise rates a week before the midterm elections, that's really something. It's similar to grabbing President Trump by the collar." This indicates that the Fed's interest rate decision is a complex situation that goes beyond simple economic judgment and must consider political ramifications.

He predicts that the capacity of computers and data centers currently being built will lead to actual productivity gains within the next few months. Park Byung-chang conveyed his stance, saying, "Secretary Beesant says AI will be a key driver of U.S. economic growth and productivity improvement. He believes the capacity of computers and data centers currently being built will connect to actual productivity gains in the coming months. His position is that increased AI investment should be seen as an investment that boosts future growth rates and productivity, rather than just a burden on capital markets." This means that expanding AI investment should not be seen merely as a burden on capital markets, but as an investment that will boost future growth rates and productivity. This presents a strategic perspective that through productivity improvement, the debt burden relative to GDP can be lowered, and inflationary pressures can be alleviated in the long run.

Sectors and stocks where exports have increased, especially significantly in terms of quantity (Q), are expected to show strength in the market today. Park Byung-chang mentioned, "Today the export-import trends will be announced. If exports increased in August, especially a lot in terms of Q, those sectors and stocks will move today. So you can expect a stock-specific market today." The announcement of export performance is expected to act as an important catalyst for sector-specific stock movements. An analysis also suggests that investors might use a strategy of pre-purchasing stocks expected to perform well in exports according to existing patterns and selling them immediately after the announcement.

During his tenure, there were many critical voices among investors regarding ETF-related policies and tax policies. Yeo Do-eun said, "Kim Yong-bum, Policy Chief, submitted his resignation, and it was accepted. There was some resentment among investors. Both regarding ETFs and tax policies, it seems he made many choices that weren't helpful." Investors tended to believe that the policy decisions he made did not have a positive impact on the market. This resignation can be interpreted as partly reflecting such critical public opinion.

The pharmaceutical and biotech sector, despite low overall year-to-date returns, showed improved monthly returns recently. This positive impact is believed to be due to large deals and rights offerings in August, as companies continued to increase their scale. Kim Seon-ah explained, "Looking back at the events in August, if such events happened and the stock didn't go up, it would feel so powerless. In terms of monthly returns, stock prices rose to a level comparable to other sectors." This suggests that key events within the sector acted as positive momentum for stock price increases.

News has emerged that the introduction of the KOSDAQ upgrade/downgrade system has been dramatically postponed. The market generally perceives this postponement as a positive development for the second half of the year. Kim Seon-ah stated, "Yesterday, news broke that the upgrade/downgrade system was dramatically postponed. This postponement is actually seen as a positive for the second half. I think an atmosphere has been created where investors can now increase their holdings without worrying about the system." The analysis is that with the uncertainty surrounding the upgrade/downgrade system resolved, an atmosphere conducive to increasing holdings in the relevant sectors has been formed. Investors can now more actively consider investing in these stocks without concerns about the system.

The U.S. declared a national emergency, announcing measures to ban the import of power equipment from sanctioned countries like China. Lee Jae-chan analyzed, "I believe that the U.S. declaration of a national emergency will actually have limited direct benefits for domestic companies. Their market share is too small to begin with." The prevailing view is that these measures will have limited direct benefits for South Korean power equipment manufacturers. This is because Korean companies have a negligible share in the U.S. ultra-high voltage transformer market. Therefore, the impact of the U.S. import restrictions on the performance of Korean companies is not expected to be significant.

Lee Jae-chan stated, "I tend to drastically exclude if earnings estimates deviate from expectations and the scenario. I also tend to observe for at least 3 months." It is recommended to maintain a trading cycle of at least 3 months, emphasizing that the focus should be on whether the structural scenario deviates rather than short-term volatility. This means that stop-loss should be considered when the intrinsic value and growth story of a company are compromised from a long-term perspective.

Jung Ho described the current market, saying, "Regarding the market situation, I think we are in a non-trending phase. Yes, I think so. So, yes, we have a zero-gravity zone, right? When you go to space, things float around." Concerns about U.S. interest rate hikes and geopolitical risks are acting as burdens on the market. At the same time, strong corporate earnings are limiting downside pressure, causing the market to move without clear direction both upwards and downwards. This suggests that investors are in a confusing period where it is difficult to predict direction.

Jung Ho said, "We take Samsung Electronics and Hynix... and in my portfolio, not only Samsung Electronics and Hynix, but also Nvidia and companies like Google... U.S. biotech companies are also proven by their earnings growth and valuation," recommending the inclusion of U.S. companies in addition to Korean ones. He proposed strengthening the portfolio by including U.S. blue-chip companies such as Nvidia, Google, Eli Lilly, SpaceX, and Netflix, in addition to Samsung Electronics and Hynix, to form a 'Global Best Eleven'. He also emphasized that U.S. biotech companies often have their valuations proven by earnings growth. This implies that investors should broaden their horizons beyond the domestic market to the global market to expand investment opportunities.

Zcash, previously known only as a privacy coin, recently experienced a sharp surge. Ham Ji-won explained the reason, saying, "The reason why Zcash, which was only known as a privacy coin, surged like this is because Grayscale launched the first Zcash ETF in the U.S. market on August 25th last week." The launch of Grayscale's Zcash ETF in the U.S. market on August 25th is analyzed as the main reason. With news that the DCG group plans to hold 3.5% of Zcash's circulating supply, expectations of a price increase due to accumulation by large investors, or 'whales,' have also played a role. This demonstrates the influence of ETF launches on the virtual asset market, as well as the significant role of large investors' movements in price formation.

This suggests that the price movement of a specific virtual asset can be more heavily influenced by supply and demand factors, such as the influx of large capital, rather than technical characteristics or narratives. Therefore, for virtual asset investment, it is crucial to meticulously analyze market fund flows in addition to functionality.

Lee Jang-won commented, "In the beginning, considering tax cooperation and administrative costs, if you introduce the system, I think you could set a higher deduction amount to secure data on high-value, diligent investors first." The opinion is that increasing the deduction amount is necessary for tax cooperation costs and securing data on diligent investors. Additionally, the absence of incentives for diligent taxpayers, such as reporting tax credits, is also pointed out as a problem. This is analyzed as potentially hindering the growth of the virtual asset market and causing dissatisfaction among investors.