Hawkish FOMC Investment Strategy... Inflation, Reopening, and Metaverse

Eyes on This Year's Final FOMC
Accelerated Tightening Clock Investment Keywords

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] Ahead of the last U.S. Federal Open Market Committee (FOMC) meeting of the year, held over two days starting on the 14th (local time), investors are closely watching the 'accelerated tightening clock.' The Federal Reserve (Fed) is expected to take a hawkish stance at this meeting, and based on past tightening cases, inflation, reopening, and the metaverse are emerging as key investment themes.

According to Hana Financial Investment on the 14th, the Fed has maintained a dovish stance supporting risk asset prices in December FOMC meetings held since 2015, except for one occasion. In 2016, the Fed showed a tightening stance once, which was accompanied the following year by rising long-term interest rates and a stronger dollar.

However, the KOSPI did not experience a price correction at that time. Rather, expectations for the economy the following year dispelled tightening concerns, and the KOSPI's operating profit estimates continued to be revised upward until early in the next year. Lee Jae-sun, a researcher at Hana Financial Investment, said, "This is a point where the Fed's view on next year's economic growth becomes important," adding, "Assuming a high possibility of an upward revision in the dot plot, it is necessary to carefully watch Chairman Powell's interviews and revised economic growth forecasts."

The sectors that outperformed the KOSPI in 2016 were IT, healthcare, and media, which continued to see upward revisions in earnings estimates after the FOMC or recorded lower returns compared to next year's earnings expectations.

This year, sectors reflecting these ideas include inflation (machinery), reopening (food and beverages), and metaverse (media). The researcher explained, "The profit influence of food and beverages slightly expanded starting in December, while machinery's market capitalization influence decreased relative to earnings. Media has attracted steady foreign interest since April, although the foreign ownership ratio within the sector still falls below the five-year average (14%)."

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