[Good Morning Stock Market] Fed "Zero Interest Rate Until 2023"...Low Possibility of Liquidity Deterioration

Jerome Powell Chair "Base Interest Rate Hold, Policy Maintained for 3 Years"
Low Interest Rates Favor Investment Environment..."Liquidity Strength Will Continue"

[Asia Economy Reporter Minji Lee] In the New York stock market, major indices showed mixed trends as technology stocks experienced larger declines. The Dow Jones Industrial Average rose 0.13% from the previous session, but the S&P 500 and Nasdaq indices fell by 0.46% and 1.25%, respectively.

Despite the Federal Reserve (Fed) stating in its Federal Open Market Committee (FOMC) regular meeting statement that it would maintain low interest rates through 2023, the market assessed that the announcement did not deliver as strong a boost as expected. However, market experts predicted that liquidity-driven conditions would continue as the Fed reaffirmed its stance on maintaining a prolonged low interest rate policy.

[Image source=AP Yonhap News]

◆ Sangyoung Seo, Kiwoom Securities Researcher = The U.S. stock market saw the Nasdaq turn downward as large technology stocks increased volatility. Apple, for example, dropped nearly 3% following its new product launch, which is presumed to be due to the failure to release a product that could shock the market. Facebook fell by 4% after news emerged that the Federal Trade Commission (FTC) is preparing an antitrust lawsuit, triggering related sell-offs. With the industry concentration becoming excessively pronounced and concerns over strengthened antitrust laws rising, the possibility of increased regulation through lawsuits has led to declines in major tech stocks.

Fed Chair Powell’s remark at the FOMC that monetary policy should not be fighting on the front lines of financial stability also influenced the index decline. This is interpreted as the stock market feeling burdened by showing strength that differs from fundamentals based on the Fed’s low interest rates. Additionally, the Fed’s cautious stance on additional stimulus, stating that the current level of bond purchases is appropriate, is also believed to have impacted the indices.

◆ Daehun Han, SK Securities Researcher = Despite the Fed’s accommodative policy announcement, the U.S. stock market declined mainly in technology stocks. This was somewhat expected, and there was no concrete content compared to market expectations, such as not specifying the period to achieve the average inflation rate of 2%.

However, there is no need to be overly reactive to the FOMC results. The Fed clearly stated it will maintain a long-term low interest rate policy, and the low interest rate environment is highly favorable for investors. The power of liquidity is unlikely to deteriorate.

Positive news also emerged regarding the U.S. fifth economic stimulus package, which had seemed unlikely to be agreed upon. President Trump urged the Republican Party to increase the size of the stimulus package, and accordingly, Chief of Staff Mark Meadows stated that the likelihood of negotiations has increased in the past 72 hours compared to the previous 72 days. Expectations for policy have risen again.

This is also positive for the domestic stock market. Unlike in the past, the conflict between the U.S. and China is expected to bring spillover benefits to domestic companies including Samsung Electronics. The relative strength of emerging market currencies is also positive from the perspective of foreign investors. Regardless of the September FOMC results, the stock market still has room to rise.

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