"‘Akjae Peak-Out’ VS ‘Market Elasticity Declines’... Stock Market at Inflection Point in 'Fog'"

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] The stock market outlook remains uncertain through the last week of this year and into early next year. In the financial investment industry, the recent easing of negative factors such as Omicron and inflation, which had been suppressing the market, has led to a rebound driven by large-cap stocks, but there are conflicting voices warning that market vitality is actually declining.

According to the financial investment industry on the 27th, the proportion of stocks in the Nasdaq market trading above the 200-day moving average, a medium-term trend baseline, is less than 30%. At the beginning of this year, this ratio was close to 80%. The relative strength of the ‘equal-weighted index,’ which has a high small-cap weighting, has also dropped sharply, indicating a weakening market concentration.

Park So-yeon, a researcher at Shin Young Securities, said, "On the positive side, it means that the contribution of specific stocks is expanding and the leading stocks are becoming clearer, but on the negative side, it means that the overall market momentum is declining." She advised, "In the past, when concentration dropped sharply in a short period, the entire market often underwent a correction for about 3 to 6 months, so observation is necessary this time as well."

On the other hand, regarding Omicron, which struck the year-end market, research results showing a low probability of severe cases have reduced the need for full economic lockdowns. Reflecting this optimism, the U.S. S&P 500 index reached a historic high of 4725.79 on the 23rd, reviving hopes for a ‘Santa Rally.’

Recent U.S. consumer confidence index data showed the consumer outlook on inflation recorded the largest decline since July last year, leading to analysis that both major negative factors are being resolved.

Seo Jeong-hoon, a researcher at Samsung Securities, said, "Since it is the year-end period with holidays and ‘book closing,’ market liquidity depth is inevitably very shallow, so market sensitivity will be higher than ever," but added, "Considering that the momentum of negative factors is weakening, we can expect a positive trend after early next year when investors fully return."

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