[Weekly Market Outlook] Market Reacted Only to Presidential Election Good News, Reasons for Possible Short-Term Peak

Trump's Election Dispute → Delay in Additional Stimulus Agreement → Increased Market Volatility
Chasing Buys Near 2450 Level Is Risky
"Opportunity to Buy Stocks Cheaper Than Now in November"

[Asia Economy Reporter Oh Ju-yeon] Domestic and international stock markets reacted to the 'Biden tailwind' following the US presidential election, sharply rising centered on the election beneficiaries. The KOSPI rose 100 points from 2300 to 2400 over the past week. However, there is an analysis that it is necessary to watch whether there will be additional gains at the previous high level of around 2450. This is because the Trump administration, with an increased possibility of failing re-election, is contesting the election results and filing lawsuits as some had predicted.

Although the lawsuits contesting the results have been repeatedly dismissed and not accepted by the courts, if a large-scale legal battle continues, it could make it difficult to reach an agreement on a stimulus package by the final deadline for selecting electors on the 8th of next month, potentially impacting the stock market.

Additionally, the spread of COVID-19 in the US and Europe is also a burden. After the election, investors' attention may shift back to whether there will be a resurgence of the coronavirus. Accordingly, the securities industry is placing weight on the possibility of increased short-term volatility going forward.

[Image source=Yonhap News]

On the 8th, NH Investment & Securities presented the expected KOSPI band for the second week of November (9-13) as between 2350 and 2450. While the resolution of uncertainty over the US presidential election and the strong performance of Korean exports are cited as factors for the rise, delays in US stimulus package negotiations and the global spread of COVID-19 are analyzed as factors for decline.

Researcher Kim Young-hwan of NH Investment & Securities diagnosed, "In a situation where the possibility of 'President Biden, Republican majority in the Senate, Democratic majority in the House' is likely, the market has rallied in relief, holding expectations that a stimulus package led by the Democrats could be large and that the Republicans in the Senate will block unilateral Democratic policies." He also mentioned, "Although the possibility of contesting the election results has emerged, realistically, the chance of overturning the election results through court rulings is low."

However, he forecasted that if the stimulus package negotiations are delayed and economic indicators worsen, stock market volatility could increase.

Researcher Kim said, "President Trump is currently providing $300 in federal unemployment benefits through executive orders, but the funds used for this have already been exhausted in 17 states," adding, "If no additional stimulus package agreement is reached, market anxiety will inevitably increase."

He continued, "In the short term, the stock market is strongly reacting to positive news and insensitive to negative news," but emphasized, "However, after the overheated atmosphere in the stock market caused by the resolution of uncertainty over the US presidential election cools down, factors that could increase market volatility again still exist."

Researcher Kim advised, "There will be opportunities in November to buy stocks at cheaper prices than now," and recommended, "At this point, rather than chasing purchases, it is better to observe in the short term and engage in bargain buying during periods of increased volatility."

Daishin Securities also forecasted that increased stock market volatility is inevitable until the president is officially confirmed.

Researcher Moon Nam-jung of Daishin Securities predicted, "Since Trump's declaration of contesting the results is becoming a reality, there is a high possibility that the situation from the 2000 43rd presidential election, where it took 35 days after the election to confirm the president, will be repeated." During those 35 days, the S&P 500 and Nasdaq indices fell by 4.2% and 14.2%, respectively.

Researcher Lee Kyung-min of Daishin Securities pointed out, "The possibility of increased US political uncertainty, prolonged and surging COVID-19 cases leading to strengthened lockdown measures, and concerns over the slowing pace of economic recovery are variables that could stimulate short-term volatility."

Researcher Lee assessed, "Much of the US issues have already been reflected in the market," and diagnosed, "Since positive news has been more reflected, chasing purchases seems burdensome."

He said, "It is reasonable to confirm whether the KOSPI breaks through and stabilizes above 2450 and respond accordingly," recommending, "Until then, use the noise for phased buying and increasing weighting strategies during corrections."

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