Market Focus Shifts to 'Economy'... "Increasing Proportion of Domestic Demand and Economic Defensive Stocks"

Confidence in Smooth Economic Landing Wanes After US Rate Cut
Potential Negative Impact on Stock Prices if KOSPI Rises and Pivot Occurs

[Image source=Yonhap News]

On the 28th, IBK Investment & Securities advised that there is a possibility that the U.S. economy may not achieve a soft landing ahead of the U.S. interest rate cut, and recommended focusing on risk management rather than strategies to maximize profits.

Junho Byun, a researcher at IBK Investment & Securities, stated, "Ahead of the U.S. interest rate cut, we recommend reducing the proportion of export and cyclical stocks in the stock market and increasing the proportion of domestic consumption and defensive stocks."

With the Federal Reserve's rate cut at the September Federal Open Market Committee (FOMC) meeting becoming a foregone conclusion, the market is now focusing on fundamentals rather than the rate cut itself. Therefore, attention is centered on whether the U.S. economy will achieve a soft landing as the market expects.

Researcher Byun pointed out, "From late July to early August, stock market volatility sharply increased, gradually diminishing confidence in a soft landing," and added, "Historically, the stock market performed well on days of rate cuts, but since the second half of the year, there has been an increasing phenomenon of the domestic stock market plunging on U.S. rate cut days."

Byun explained, "Looking back at the first U.S. rate cut, it is ambiguous whether the rate cut was truly a positive factor," and emphasized, "The important implication here is that the direction of the KOSPI usually changed before and after the rate cut." In other words, there was always a downturn phase either before or after the rate cut.

Byun analyzed, "When the KOSPI declined before the rate cut, the rate cut acted as a positive factor, but if not, it was either not positive or even acted as a negative factor," and added, "Currently, since the KOSPI has somewhat risen before the rate cut, there is a possibility of a decline after the cut."

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