[Good Morning Stock Market] Changing Atmosphere Period... "Balance Needed with Consumption Recovery in Mind"

Risk Assessment Indicators Stabilizing... Increase in Stocks Hitting New Highs Reported

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Expectations that the economy, which had been stagnant due to the novel coronavirus infection (COVID-19), will recover are being reflected in the stock market. Analysts suggest that investment strategies should be tactically adjusted considering the recovery of consumer sentiment.

◆ Daejun Kim, Researcher at Korea Investment & Securities = The mood in the U.S. stock market has recently changed. Although the number of COVID-19 cases continues to rise, the appearance of recovered patients leaving hospitals is gradually weakening the fear of the disease. The administration and central bank's continued stimulus policies are also contributing to the recovery of sentiment. For example, risk assessment indicators such as the Volatility Index (VIX) are more stable than before.

It is also noteworthy that the number of stocks hitting new highs is gradually increasing. On the 18th, 22 stocks, accounting for 4.4% of all stocks, reached 52-week highs. Most of these are in sectors favorable during the COVID-19 period, such as food and beverages, healthcare, and software, but as time passes, it is expected that other sectors will also increasingly record new highs. Moreover, a rebound trend has been confirmed in most sectors. Among S&P 500 companies, 93% rose. Among them, travel-related stocks such as United Airlines, Expedia, and Marriott responded proactively, anticipating normalization of consumption. This is because Moderna's announcement of the first phase clinical trial of its COVID-19 vaccine can instill optimistic expectations in the sector.

Korea can move along the same lines. In fact, the stock market trend the previous day reflected this. Sectors related to consumption such as automobiles, transportation, cosmetics, and clothing showed favorable trends. In the detailed items of the Consumer Sentiment Index's expenditure outlook, consumption on travel, dining out, and entertainment has stopped, but the possibility of gradual resumption should be considered. Of course, it is not recommended to completely shift the investment focus to cyclical sectors like automobiles and transportation. It is advised to tactically adjust by slightly reducing the weight of leading sectors in the 'post-COVID' era that have risen significantly recently and filling the remainder with cyclical sectors. At this point, such balance is essential to maintain returns.

◆ Jinwoo Lee, Researcher at Meritz Securities = The financial market environment in the second half of the year remains challenging. Amid concerns over a second wave of COVID-19, economic recovery is slow, and the risk of corporate defaults exists in some emerging countries and specific industries. The international environment is also complex. Ahead of the U.S. presidential election, the power struggle between the U.S. and China is reigniting, and protectionism is intensifying. However, the current global economic crisis is not expected to develop into a long-term depression comparable to the Great Depression or the U.S. financial crisis. This is because it is not seen as a deflationary recession caused by deleveraging. Although a recession is expected, it will be short and intense, and proactive policy responses without hesitation will prevent self-reinforcing credit crunches. The second half of the year is a time to prepare investment strategies for the post-COVID-19 world rather than being swayed by extreme pessimism.

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