Uncertain Stock Market, Invest in Dividend Stocks

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[Asia Economy Reporter Ji Yeon-jin] The U.S. central bank, the Federal Reserve (Fed), has mentioned the possibility of starting tapering (asset purchase reduction) within this year, increasing uncertainty in the stock market. Experts suggest stable dividend stocks as a response strategy, as the trend-driven economic recovery that will lead a bull market requires further confirmation of economic indicators.

According to the Korea Exchange on the 7th, as of the previous day, the KOSPI High Dividend 50 Index recorded a return of 37% compared to the beginning of the year. During the same period, the KOSPI rose by 11.48%, and the KOSPI 200 by 7.98%. Cha Hyun-gi, a researcher at Cape Investment & Securities, stated, "Since there is no leading sector in the stock market and style strategies are unclear, dividend stocks are an effective strategy."

The domestic stock market showed a bull market until January this year due to the global money supply by various countries to overcome the economic crisis caused by the worldwide COVID-19 pandemic last year. However, since then, concerns about inflation and the resulting liquidity reduction have been holding back the market.

In particular, with Jerome Powell, Chairman of the U.S. Federal Reserve, mentioning the start of tapering within this year at the Jackson Hole meeting late last month, the recent deterioration in U.S. employment data has made the timing of tapering uncertain. Looking at the Fed's past policy decisions, tapering decisions were made after careful consideration of market impact, but once decided, the execution speed was rapid, which has increased recent stock market volatility.

There are also concerns that the 'taper tantrum' seen during the U.S. tapering in 2013 may recur, leading foreigners to withdraw funds. Seo Sang-young, a researcher at Mirae Asset Securities, said, "The results of the U.S. employment report and the slowdown in China's economic indicators suggest a possibility of global economic slowdown in the second half of the year, raising concerns about foreign demand pressure," adding, "The employment report results may increase uncertainty about the Fed's policy actions for the time being, which is a burden."

Considering this situation, it is necessary to pay attention to stocks with stable earnings volatility. Choi Jae-won, a researcher at Kiwoom Securities, said, "If tapering occurs after the stock price recovery trend continues until the first half of this year, stocks that had large price fluctuations based on earnings recovery are likely to see increased volatility due to profit-taking sales," adding, "Stocks with relatively stable earnings volatility so far are interpreted to have relatively less risk in the current phase."

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