[In-Depth Look] Investor's Perspective - From Market to Industry

Nam Dong-jun, CEO of Tekton Investment Advisory

The stock market, which had high expectations, began to become complicated starting from mid-February this year. The U.S. long-term interest rates surged sharply over the course of a month. As the 10-year U.S. Treasury yield exceeded 1.5%, fears of inflation and concerns over early tightening by the U.S. Federal Reserve began to spread. Subsequently, the global stock markets exhibited a typical ‘volatile market’ phase for about three months until mid-May. Even after several months, concerns about inflation, tightening, and bubbles remain. Although some have been resolved, the unstable trends in employment indicators and price indices have continued, causing fears of tightening to solidify into more concrete negative factors.

However, the actual stock market trend has gone in the exact opposite direction of what was expected at the time. In particular, the U.S. stock market, which was the greatest concern, has repeatedly reached historic highs. Stock markets around the world have also maintained an upward trend, despite differences by country. If one has failed to accurately predict the stock market trend from the beginning of the year until now, it is necessary to reflect on the reasons. This is not to say that market forecasts were wrong or that being wrong is a problem. Rather, it means reviewing and correcting the things we were excessively fixated on.

What mattered was our state of mind. It was quite different from the present. You might recall the buzzword FOMO (Fear of Missing Out). At that time, most investors were more obsessed with the anxiety of being left out of the ongoing rising market than with the fear of losses.

The voices of many experts were similar. Of course, it is commendable that they interpreted and organized the issues well at the time. However, the textbook interpretation that rising interest rates lead to falling stock prices is a point for reflection. This is despite having experienced that the correlation between interest rates and stock prices varies greatly depending on the phase and issue. Experts were also in a hurry and excited. Headlines and forecast reports containing words like long-term interest rate rise, inflation, and bubble were published daily. As the pressure to make money quickly increased, they had no choice but to cling to short-term market forecasts. When negative factors emerged, they had to issue pessimistic forecasts, and the months-long adjustment was inevitably seen as a downturn at the time.

Now, investors’ attitudes have completely changed compared to the beginning of the year. Although interest rate rises and inflation have not yet been resolved, their influence has significantly diminished. Related schedules have become clearer, and execution conditions have been presented more concretely, allowing investors to move away from vague concerns. They also seem to have escaped the pressure to make money quickly. They no longer react to most market-related news.

Many investors are returning to a perspective that values the long-term growth of industries and companies. Behind the recent record highs of U.S.-centered growth stocks was the return of wise investors. Although the overall index trend sometimes moved sideways, the market capitalization of innovative companies within growth industries continues to surpass previous limits.

Interest in emerging industries and investment in those companies will continue to expand. Industries such as big data, cloud computing, autonomous driving, bio, payment, and entertainment, which are newly emerging based on intelligent infrastructure like artificial intelligence (AI) beyond the internet and mobile, are experiencing exponential growth on a quarterly basis. The more investors adopt a long-term perspective, the more value can increase. What kind of perspective and time horizon must we have to succeed in investing? It tells us that we should focus not on short-term market forecasts but on long-term changes in industries and companies.

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