Expectations for Inflation Easing... Will There Be Rotation Among Large-Cap Stocks?

[Image source=AP Yonhap News]

[Asia Economy Reporter Junho Hwang] It is forecasted that excessive concerns about liquidity tightening by the end of this year will diminish, and there is a need to raise expectations for consumer-sensitive stocks. Researcher Seojunho from Samsung Securities stated this in the 'Market Preview: Weekly Shot' report on the 21st.

Researcher Seo analyzed that Macy's, a leading American department store company, indicated through its quarterly earnings announcement last Thursday that concerns about inflation are weakening.

Contrary to worries about declining performance due to recent economic concerns and reduced consumption, Macy's recorded a big surprise. The annual guidance (earnings forecast) was also significantly raised. Expectations for sales performance during the year-end shopping season have increased. In particular, the forecast that earnings per share will expand more than sales was highlighted. This suggests an expected improvement in corporate margins, meaning consumers are likely to sufficiently absorb the higher prices caused by inflation.

Researcher Seo said, "Through Macy's performance, although stagflation concerns were widespread, it can be seen that private demand remains strong," adding, "This suggests that premature concerns about economic slowdown are not yet necessary." He continued, "After passing through this year's year-end consumption season, household demand for consumer goods is likely to be partially resolved, and excess corporate orders are expected to normalize," and "If so, the currently highlighted inflationary pressures are also likely to ease."

Additionally, energy and logistics costs have already passed their peak, and wage growth rates, which could be seeds of structural price increases, remain limited. The recent return of workers is also expected to reduce price pressure by increasing production operating rates. The appointment of the Federal Reserve Chair is expected to be decided around the 25th of this month, which, according to Researcher Seo, is likely to resolve policy uncertainties.

Researcher Seo predicted, "These factors may imply economic stimulus signals," and "It is reasonable to expect them to serve as catalysts for a stock market rebound."

In particular, "The fact that foreign capital inflows, albeit small, have continued recently in the domestic stock market can be seen as a signal indicating rotation from individual stocks to large-cap stocks," and "Considering that concerns about China's economic slowdown are subsiding, a rebound in economically sensitive sectors centered on materials stocks is also expected," he analyzed.

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