Markets Temporarily Relieved as US Presidential Election Uncertainty Eases

KOSPI and KOSDAQ Start Higher Ahead of US Presidential Election Results
Focus on Uncertainty Resolution Rather Than Election Outcome
Past US Elections Showed Positive Market Trends
Temporary Volatility May Increase, but Market Expected to Rise Post-Election

Ahead of the U.S. presidential election results, the KOSPI showed a slight upward trend on the 6th. The market appears to be focusing more on the resolution of uncertainty rather than the election outcome itself. Experts predict that, considering the stock market's relatively positive performance following past U.S. presidential elections, the market will likely rise as the uncertainty that has been weighing it down is resolved once the election concludes.

[Image source=Yonhap News]

As of 9:40 a.m. on the 6th, the KOSPI was at 2,579.79, up 2.91 points (0.11%) from the previous day. The KOSDAQ rose 6.13 points (0.82%) to 757.94.

The U.S. stock market closed higher the previous day, and regardless of the election outcome, the market seems relieved by the resolution of uncertainty. On the 5th (local time), the Dow Jones Industrial Average rose 1.02%, the S&P 500 increased 1.23%, and the Nasdaq Composite gained 1.43%.

Ji-won Kim, a researcher at KB Securities, said, "The U.S. stock market rose focusing on the resolution of election uncertainty," adding, "The revived buying sentiment centered on tech stocks is expected to have a positive impact domestically as well."

Considering that the stock market trends after past U.S. presidential elections were not unfavorable, the market is placing weight on the possibility of an upward trend following this election as well. Dong-gil Noh, a researcher at Shinhan Investment Corp., explained, "Investors' interest lies in the stock price trend after the election, and the conclusion of the election has historically acted favorably for stock prices," noting, "Since 1964, the S&P 500 has risen an average of 5.7% one year after 15 presidential elections."

Hae-jung Yang, a researcher at DS Investment & Securities, said, "Empirically, the market trend after U.S. presidential elections has not been bad," adding, "Since the financial crisis, the U.S. market has shown an upward trend while the KOSPI remained flat. Regardless of which administration took office, the upward trend continued." She further added, "Additional interest rate cuts are still possible, and even if Donald Trump is elected, he is unlikely to implement policies that would harm U.S. economic growth, so the KOSPI will likely participate in the growth of the U.S., which accounts for 20% of Korean exports."

However, volatility is expected to increase until the election results are finalized. Ji-young Han, a researcher at Kiwoom Securities, said, "The outline of the U.S. presidential election winner can be confirmed from the vote counts in seven key battleground states (Pennsylvania, Ohio, Wisconsin, Michigan, Montana, Nevada, Arizona, Texas). During the process of confirming the vote counts in these states, before the winner is clear, the leadership between the Trump trade (strong dollar, strong Bitcoin, weak green stocks, weak auto stocks, etc.) and the Harris trade (weak dollar, strong green stocks, weak energy stocks, etc.) will shift frequently," adding, "This suggests that price volatility across not only the domestic stock market but also Asian stock markets, U.S. futures markets, bond and foreign exchange markets could temporarily increase."

Sector-specific responses will likely be necessary depending on the election outcome. Dae-seok Kang, a researcher at Yuanta Securities, said, "In the phase where short-term market volatility is peaking according to the election winner's outline, it is necessary to respond focusing on sectors already recognized by the market," adding, "If Vice President Kamala Harris is elected, it will be relatively positive for stock prices outside the U.S., including the domestic market, due to the continuity and stability of current U.S. government policies and the easing of dollar strength. In particular, a rebound in the secondary battery sector and the KOSDAQ is expected domestically." He further added, "If former President Trump is elected, interest in machinery, finance, and defensive sectors will continue."

On this day, defense and nuclear power stocks, considered beneficiaries of a Trump victory, showed strength in the domestic stock market. Hanwha Aerospace rose 1.8%, LIG Nex1 increased 4.92%, and Doosan Enerbility gained 2.21%. Conversely, secondary battery stocks, beneficiaries of Harris, showed weakness. POSCO Holdings fell 1.47%, Samsung SDI dropped 0.63%, and EcoPro BM declined 1.29%.

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