The New York Stock Market almost collapsed in Kim Hyun-seok's Wall Street Now... The way to go in the future

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It was a terrifying start. On the 23rd (local time) at 9:50 a.m. on the New York Stock Market, the Nasdaq Composite Index plunged to 530 points, 3.9%, and fell to 13,033.98. It was such a situation where the 13,000 line could be broken. The Dow, which has recently maintained a single plus due to the economically sensitive stock, was also falling by more than 1%.

Tesla was at one point in terror, plunging to 13%. It fell to $619 per share and fell below the stock price ($649.86) on December 21, which was included in the S&P 500 last year. Modena fell by more than 10%, and blacksmith Apple fell by close to 6%.

[김현석의 월스트리트나우] The New York Stock Market almost collapsed... What is the way to go in the future?

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Investors were awakened little by little when the keynote remarks came out in the Senate testimony of Fed Chairman Jerome Powell before 10 am.

In fact, it was difficult to find anything new in the keynote speech of Chairman Powell and the question-and-answer with the lawmakers online until the afternoon. The all-encompassing message was’We will continue to maintain the existing easing monetary policy until the economy recovers.’ It can be summarized in roughly three ways.

① It doesn’t put much of a big meaning on rising interest rates

“If you look at what the market is seeing,” Powell said of the recent rise in interest rates, “the expectation of an economic resumption through vaccination, fiscal stimulus, monetary policy, piled private savings, and much higher corporate returns.” In other words, the rise in interest rates was not due to inflation expectations, but to’good reasons’ such as economic recovery.

“The Fed sees a range of financial markets besides bond rates,” he said. It’s not going to put much of a lot of significance on rising interest rates.

② No inflation problem

“Inflation has partially rebounded for the rest of last year after a sharp decline in the spring of last year,” said Powell. “Overall, inflation is less than our long-term target of 2% in 12 months. It is maintained as”.

He also explained about inflation in the future, “the inflation pressure from the economic resumption will continue and will not be great. I do not expect the price to rise to the point of a problem.” It has alleviated investors’ anxiety over inflation, which has grown rapidly recently.

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③ Purchase of bonds lasts a considerable period

“The economy is far from our employment and inflation targets,” said Powell. “Until substantial further progress is made, we will continue to support the economy with near-zero interest rates and large asset purchases.” “It will take some time to achieve this,” he added.

This means that the current bond purchase will continue for a considerable period of time. Doing so can slow the rise in interest rates.

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A Wall Street official said, “Chairman Powell has slightly eased investors’ concerns over interest rates, inflation, and any possible taper.”

The 10-year Treasury yield has fallen from 1.381% per annum to 1.357% per year since Powell’s remarks. After that, it kept around 1.35~1.36%. The two-year and thirty-year interest rates rose a little, but only slightly.

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As interest rates stabilized, the buying trend of stocks improved over time. The Dow and S&P 500 indexes turned higher and closed up 0.05% and 0.13%, respectively, while the tech stock-oriented Nasdaq index fell 0.5% to better. It was a dramatic rebound given that it once plunged to 3.9%.

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Tesla also closed at a drop of 2.19%, while Apple fell 0.11%. The peloton, which fell the most among technology stocks this year, also ended with a 0.91% increase on the day. The Arc Innovation ETF, which once fell more than 10% along with the Tesla crash, ended with a 3.30% decline.

The economy sensitive stock was also good this day. AMC Entertainment, which opened in New York next month, soared 17.56%, △MGM Resort 5.52% △Disney 2.78% △Carnival 1.89% △Alaska Airlines 4.57%. By industry, the energy sector rose by 1.61%, up 27% this year. The financial sector rose by 0.5%, the material by 0.32%, and the industry by 0.28%.

Wall Street believes that interest rates will continue to rise as the economy recovers. However, I do not expect the speed to continue as fast as it is now.

So how will the New York Stock Market move in the future?

A Wall Street official said, “I think it will remain at the current level for the time being until the economy recovers in earnest and corporate profits improve in detail.” Revealed.

He observed that there will be adjustments in line with rising interest rates, especially for technology stocks that have risen significantly. In a customer memo titled’Noah’s Ark (Arkk)?’, strategist Peter Chir of Academy Security said, “Too many people are aboard the ship. This is an unwind.” It could be the beginning.”

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Three scenarios are circulating on Wall Street.

① Bubble collapse

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Michael Bury, the real protagonist of the movie’Big Short’, predicted a bubble burst on the 22nd. He claimed on Twitter that “the mayor is dancing on the blade.” It also revealed that investment through speculation and borrowing is driving the stock market to the brink of collapse.

However, few see that the bubble is starting to burst.

Senator Pat Tumi (Republican, Pennsylvania) asked Powell today, “The asset bubble triggered a recession in 2001 and 2007-2009. Was the recent rise in asset prices due to the Fed’s easing monetary policy?” . In response, Powell responded, “No one can specify a bubble right now.” I wasn’t worried about the current situation.

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Ray Dalio posted a post on the Bridgewater homepage the day before, saying,’Stock Market Bubble?’. He said, △Is the stock price relatively high in light of the traditional indicators △Is the stock price sustainable compared to corporate earnings forecasts and bond interest rates?△How many new investors △How hot is investor sentiment △How much debt do you invest in stocks?△Corporate investment As a result of evaluating by six criteria, such as how much is expanding, it is now ranked 77th in the percentile by the historical’bubble gauge’ of the US stock market. At the bubble of 2000, the bubble of 1929, this index was in the 100th percentile, but not that much now.

However, in the case of Dalio, he pointed out that some emerging technology stocks, which are 5% of the top 1000 stocks, have an extreme bubble. Dallio explains that “usually at the peak of the bubble, this number doubled, or 10%.”

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② Adjustment

Morgan Stanley is representative. Chief Investment Officer Mike Wilson said the market could undergo a short-term correction due to the possibility that corporate profit growth will not be as expected due to the rise in bond yields ahead of an economic recovery and a pandemic-driven supply chain disruption (like semiconductors). It. In particular, he warned that the possibility of such a correction is high because investor sentiment is on the rise now and positioning is at an extreme level.

However, he predicted that the bull market will continue with △the recovery of corporate profits confirmed in 4Q results, △confirmed vaccine efficacy, and collective immunity expected in April as soon as possible, and △a huge amount of additional stimulus measures. He recommended buying low-cost stocks in the banking, materials and energy sectors and stocks related to consumption and business services that could benefit from economic recovery and inflation.

③ Event hand change

Merrill’s Chief Investment Officer Chris Haige (CIO) calls the situation a’twist’. In other words, what’s really happening below the index is an active portfolio adjustment, be it stocks or bonds. In other words, if assets, regions, and stocks that will benefit from the economic recovery are shifting to sectors and stocks.

In other words, it is not that there is a correction in the entire market, but as the growth stocks are changed to economically sensitive stocks, the joys and losses are mixed by stocks by sector. The actual tech-focused NASDAQ continued to fall this week, but the Dow, which has many traditional value stocks, continues to rise.

Usually this is called’rotation’. However, the reason why CIO Hygis called it a’twisted’ is that the buying trend is expected to remain in the case of large technology stocks supported by performance along with economically sensitive stocks. “What we’re seeing this week is a miniature version of what’s expected to happen in the coming months,” said CIO Haizi.

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A Wall Street official said, “Rather than a large-scale adjustment in which all stocks are going down overall, stocks that have risen a lot before the economic recovery will come down and stocks that have risen less will catch up with it,” said a Wall Street official. Sometimes the whole market can be shaken.”

Reporter Kim Hyun-seok [email protected]

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The New York Stock Market almost collapsed in Kim Hyun-seok’s Wall Street Now… The way to go in the future

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