Last FOMC Pivot VS Recession Concerns... Directionless KOSPI Observation

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] This week (12th~16th), the domestic stock market is expected to show a cautious trend as expectations for a Federal Open Market Committee (FOMC) pivot by the U.S. Federal Reserve (Fed) coexist with concerns about an economic recession.

On the 11th, the securities industry forecasted that the Fed’s pivot and China’s easing of COVID-19 restrictions will act as factors driving index gains, but concerns about an economic recession will weigh down the index as a burden.

Kim Young-hwan, a researcher at NH Investment & Securities, said, "Expectations for the Fed’s easing of tightening and concerns about a U.S. economic recession are conflicting, so the market is expected to show a cautious trend without a clear direction," and presented the weekly expected band for the KOSPI at 2310~2430 points.

The FOMC meeting for this year will be held over two days starting on the 13th (local time), and on the same day, the U.S. November Consumer Price Index (CPI) will be announced. The global economy is focusing on the remarks of Fed Chair Jerome Powell, which will be released immediately after the FOMC meeting. However, unless Chair Powell makes any special remarks that overturn market expectations during the press conference, the impact of the FOMC on the stock market is expected to be limited. This is because the February FOMC made decisions consistent with market forecasts, so the short-term impact on the stock market is judged to be limited.

Ahn Ki-tae, a researcher at NH Investment & Securities, said, "There is a consensus that the base interest rate will be raised by 0.5 percentage points at this FOMC meeting," adding, "It is expected that the announcement will not differ significantly from the consensus."

Furthermore, if the November CPI growth rate slows down, the theory of an inflation peak is likely to gain strength. Experts expect the November CPI to rise by 7.3%, which is lower than October’s figure. Researcher Kim noted, "If U.S. inflation indicators do not rise noticeably higher than expected, investor reactions to the stock market are expected to be positive."

However, the index rise is expected to be limited. This is because fears of an economic recession are intensifying. Ha Geon-hyeong, chief researcher at Shinhan Investment Corp., said, "Fears of an economic recession caused by excessive tightening have deepened, and unlike the service sector where demand is strong, the manufacturing sector has entered a recession cycle accompanied by demand decline and price drops."

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