[Next week's market?] Demolition of uncertainty in presidential election, loomin

[Next week's market?] Demolition of uncertainty in presidential election, looming interest rate cut

Short-term volatility, but KOSPI likely to continue upward amid U.S. rate cut stance, eyes growth stocks

Political events and market volatility

- Former President Trump's re-election is on the rise, spreading inflation concerns, soaring U.S. bond rates and downward pressure on the KOSPI.
- There is a possibility that uncertainties related to the U.S. presidential election, including public opinion on Biden's replacement, will continue.
- However, considering past cases, the impact of political events is expected to be short-term, and now it is time to pay attention to changes in the macro environment.

Expectations for U.S. rate cuts expand

- Recently announced sluggish employment indicators and Powell's comments on slowing inflation have increased the likelihood of a rate cut in September (72.6% based on the CME Fed Watch Tool).
- If the CPI index for June, which is scheduled to be released next week, shows a slowdown in prices for three consecutive months, a signal of a rate cut is likely to be presented at the FOMC in July.
- The 10-year U.S. bond rate is expected to stabilize downward to 4.2%.

Investment Strategy

- The KOSPI is likely to rise to the late 2,800s due to the spread of expectations for a rate cut and the possibility of a net inflow of foreign investors.
- In particular, the undervaluation of growth stocks (secondary batteries, internet, pharmaceuticals/bio), which were relatively marginalized in the interest rate cut environment, can be highlighted.

Risk check

- If the Core CPI beats market expectations in June, short-term volatility in bond rates could expand.
- However, it is difficult to judge that the overall monetary policy direction itself has changed, considering the start of a proactive interest rate cut cycle by major countries and the detection of signals from the U.S. economic slowdown. Major economic indicators and schedules (July 8 to July 12)
Kim Seok-hwan, senior researcher at Mirae Asset Securities Digital Research Team
Kim Eun-ji, researcher of Mirae Asset Securities Digital Research Team

US CPI/PPI, NATO Summit, Performance, Korean Monetary Policy Committee
https://securities.miraeasset.com/bbs/maildownload/20240705121913457_3431

Summary of FOMC members' recent remarks (as of July 5)
Kim Seok-hwan, senior researcher at Mirae Asset Securities Digital Research Team

2Q GDP 1.5%... Expectations for interest rate cuts growing due to economic cooling
https://securities.miraeasset.com/bbs/maildownload/20240705121540713_3431