[Good Morning Stock Market] Little Reaction to US National Convention... Continued Strength in Eco-friendly Themes

Sustainability of Eco-Friendly Themes for the Time Being... Focus on Inflation and Interest Rates Ahead of Liquidity Changes

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[Asia Economy Reporter Minwoo Lee] With the U.S. presidential candidates' conventions concluding without much impact, there is a forecast that the green energy theme will continue in the stock market for the time being. Along with this, as signs of liquidity changes are also emerging, it is analyzed that attention should be paid to inflation and interest rates.

◆ Sungkeun Kim, Researcher at Korea Investment & Securities = With last week's conclusion of the U.S. Republican National Convention (RNC), both parties' conventions have ended. At the conventions, President Donald Trump and former Vice President Joe Biden were officially nominated as their party's presidential candidates, marking the official start of the presidential campaign. Usually, there is a boost in approval ratings immediately after the conventions, but this time, both candidates failed to show any significant convention effect. Ultimately, since no clear turning point appeared at the conventions, Biden still holds the advantage. Therefore, future attention is expected to focus on the first debate scheduled for September 29.

Senator Bernie Sanders' speech reaffirmed the unity of Democratic voters. Senator Sanders strongly appealed to his supporters that if President Trump is re-elected, the progressive momentum that has been gaining strength will be broken, so they must vote for Biden. Along with this, he presented proposals such as a $15 minimum hourly wage, large-scale green infrastructure plans, and healthcare promises.

President Trump emphasized law and order at the Republican convention while highlighting economic recovery. His core message was that the U.S. economy was in its best condition before China sent the novel coronavirus (COVID-19) to the U.S., and only he can restore it to that state. In this process, some of Trump's second-term policies were revealed. These included reshoring supply chains from China, continuous tax cuts and deregulation, lowering drug prices, and maintaining U.S. energy independence. The competition in 5G and space exploration was also mentioned. The biggest differences from Biden's policies were in energy and tax policies. Trump touted achievements in carbon energy while promising additional tax cuts. If President Trump narrows the approval rating gap in the future, cyclical sectors led by the energy industry could respond most sensitively.

◆ Seunghyun Kim, Researcher at Yuanta Securities = The U.S. M2 money supply growth rate in July rose again to +23.3%. The strength of liquidity supply can be inferred from the fact that the increase in money supply in April and May exceeded the annual increase in 2008, when the Federal Reserve Chairman was called 'Helicopter Ben.' The savings rate also surged abnormally, rising sharply from 8% in February to 34% in April and remaining high. The high savings rate influenced the stock market rise in July and August due to expectations of consumption recovery during normalization. In this absolute liquidity-dependent situation, indicators that can be seen as early signs of quantitative easing policy reduction are inflation and interest rates. Considering the simultaneous surge in raw material prices, inflation has already become a highly volatile environment, and the U.S. 10-year Treasury yield rose from 0.50% in early August to 0.72%. Checking the speed and trend is more important than ever.

Liquidity can be divided into rapid increase → slowdown → reduction phases, with sentiment deteriorating between slowdown and reduction. Currently, it appears to be in the early slowdown phase. The deterioration occurs after the economy has somewhat recovered. Given the nature of the stock market, if liquidity deteriorates, a stock price decline without exception is expected, so until then, focus should be on the form of economic recovery.

Attention should be paid to cyclical semi-durable/durable goods, information technology (IT) hardware (HW), and interest rate-related banks. The recent differentiation phenomenon in European stock markets is worth referencing. Germany has recovered to pre-COVID-19 levels, but the rebounds in the U.K. and France are minimal. Especially, the U.K. remains at its lowest level in 5 to 6 years. The cause is attributed to the fact that IT and cyclical consumer goods account for 34% in Germany but only 8% in the U.K.

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