"The Stock Price Climbs the Wall of Fear"…Remember Wall Street's Adage for the June Market

[Asia Economy Reporter Lee Seon-ae] As the Wall Street adage goes, "Stock prices climb the wall of fear," the US stock market is showing a rebound after escaping from extremely subdued investor sentiment. It is expected that concerns can be eased if the three hurdles to watch in June?employment and inflation indicators, and the Federal Open Market Committee (FOMC)?are successfully overcome.

On the 4th, Moon Nam-jung, a researcher at Daishin Securities, said, "For the stock market to continue its rebound in June, it must overcome three hurdles well," adding, "The May employment report (3rd), May Consumer Price Index (CPI) (10th), and the June FOMC scheduled for the 14th-15th, or the 16th Korean time, are expected to produce results that the market hopes for, leading to a gradual rebound in the stock market."

Looking at the May employment report, although the nonfarm payrolls (expected 325,000) may be weaker than the previous month (428,000), the market is expected to interpret the employment market as solid based on the unemployment rate (3.5%, down from 3.6% in April) and the labor force participation rate (62.3%, up from 62.2% in April). The average hourly wage (+5.2%) is also expected to fall short of the previous month (5.5%), confirming that the influence of wage increases, a key factor in inflation, is diminishing.

The expected May CPI (core) is 8.2% year-over-year (5.9%), continuing the downward trend from 8.5% (6.5%) in March and 8.3% (6.2%) in April. While the rise in goods prices is easing, reopening-related items may maintain upward pressure due to the driving season, so the decline may not feel significant. Considering that the April CPI exceeded expectations, causing the US stock market (S&P 500 -1.65%, Nasdaq 3.18%, Dow -1.02% on May 11) to fall, if the results meet or fall below expectations, the rise in tech stocks is expected to expand.

The June FOMC is expected to continue its path to control inflation with a scheduled 50 basis points (1bp = 0.01 percentage point) rate hike.

Researcher Moon said, "The new dot plot presented since March will clarify the Federal Reserve's view on the interest rate path, which had caused significant market confusion regarding monetary policy in the second quarter," adding, "Unlike in the past, the Fed is proactively communicating with the market in advance this year, so the stock market is expected to rise as it did in the March and May regular meetings."

Meanwhile, global stock market investment is expected to be challenging this year. He said, "To maintain the continuity of the with-COVID-19 policy and economic recovery, advanced countries with relatively strong fiscal capacity are preferred, and the top investment country will be the United States, which is expected to be more robust than other countries," emphasizing, "a safe and effective strategy is necessary." He added, "The market is expected to show a bottom-high trend, and sectors with low volatility and high dividends, sectors that can guarantee earnings stability (energy, consumer discretionary, industrials), and growth stocks (IT, healthcare, ESG (environmental, social, and governance), electric vehicles & secondary batteries, aerospace, metaverse) need to increase their weight during price adjustments in the first half from a mid-term perspective."

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