Stock Market Continuing Uptrend, When Will the Short-Term Correction Occur?

[Asia Economy Reporter Song Hwajeong] As the stock market continues its strong performance, interest is growing in when a short-term correction might occur. Since the market remains sensitive to the novel coronavirus infection (COVID-19), it is expected that a short-term correction could appear depending on the timing of the resumption of economic activities.

According to KB Securities on the 18th, most major stock markets have recovered 50% of the losses caused by the COVID-19 crisis. Eun-taek Lee, a researcher at KB Securities, analyzed, "Looking at the stock market movements after the COVID-19 outbreak, the decline was limited in mid-January as the virus was confined to China, but in February, the premise that the epidemic was limited to China was broken, triggering a sharp drop. By mid-March, the implementation of 'shutdowns,' the most realistic method to mitigate the spread of COVID-19, became the trigger for the market rebound."

Since the market remains sensitive to COVID-19, the resumption of economic activities could act as an event that expands COVID-19 uncertainties. Researcher Lee explained, "In this regard, President Trump's decision not to hastily advance the timing of economic normalization and to leave the decision to governors has become an issue that stabilizes the market. Furthermore, even if the shutdown is extended, the economic damage will not necessarily increase because government relief measures will be further expanded."

Accordingly, attention should be paid to the timing of the next economic activity resumption as a factor for short-term correction. Researcher Lee said, "With the postponement of the U.S. economic activity resumption, which was expected to be the trigger for a short-term correction, the market will rather focus on the expansion of stimulus measures."

This content was produced with the assistance of AI translation services.