[Good Morning Stock Market] Stock Market Rises Sharply in Short Term... "Attention Should Shift to US Presidential Candidates' Policies"

US Stock Market Plummets at Close... Investor Sentiment Weakens Amid Concerns of COVID-19 Second Wave
"Stay Alert to US Presidential Candidates' Policy Stances"

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The U.S. stock market closed sharply lower due to the Federal Reserve's (Fed) negative economic outlook and concerns over a second wave of COVID-19 infections. On the 11th (local time), the Dow Jones Industrial Average fell 6.9%, while the S&P 500 and the tech-heavy Nasdaq also plunged 5.89% and 5.27%, respectively. As the burden on the stock market, which had surged in a short period, increased, there is growing analysis that future presidential candidates' policies could be used as a pretext for market corrections.

◆ Namjoong Moon, Researcher at Daishin Securities = The U.S. presidential election is expected to be a trigger determining the direction of the stock market. Democratic candidate Joe Biden has gained attention for his policy stance as he approaches the average presidential approval rating (53%) measured since 1938, buoyed by domestic racial discrimination protests in the U.S. It is expected that there will be an increased tendency to use this as a pretext for market corrections. Until now, Biden had lower media exposure and presence compared to President Donald Trump, but with his differentiated approach from Trump regarding racial discrimination protests and his highlighted leadership for unity, Biden's policy stance has been added as a potentially negative variable for the stock market until the November U.S. presidential election.

Biden maintains a broad framework of moderation, pro-common people, and balanced policy support. While President Donald Trump focuses on protecting the country and economic expansion through fiscal measures, Biden is proposing centrist policies based on addressing wealth polarization, healthcare for all Americans, and free education. The policy of Biden currently attracting attention in the stock market is the tax sector. He advocates for the repeal of tax cuts for the wealthy (corporations). Biden's lead in approval ratings could lead to a slowdown in corporate earnings, stimulating investor sentiment looking for excuses for market corrections amid recent high-level controversies. However, it is only a volatility factor for the stock market, and it is premature until the U.S. presidential election fully unfolds. Based on abundant liquidity, expectations for economic improvement may rise again, so it is unlikely to undermine the upward trend of the stock market.

◆ Kiwoom Securities Research Center = The U.S. stock market began to focus seriously on fundamentals after the Federal Open Market Committee (FOMC) meeting, leading to the emergence of sell-offs. At the previous FOMC, Fed Chair Jerome Powell indicated that the economy would recover in the second half of the year but uncertainties remain, mainly due to the resurgence of COVID-19. Amid this, the market showed differentiation based on fundamentals such as earnings and individual companies. In particular, the possibility of a second pandemic increased as new COVID-19 cases surged in some regions that announced economic reopening, sharply dampening investor sentiment. Subsequently, U.S. Treasury Secretary Steven Mnuchin announced that even if a second pandemic occurs, there will be no economic shutdown, which helped stabilize the market. Meanwhile, companies with some positive news showed resilience, highlighting differentiation in the market.

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