Last week, the Chairman of the US Federal Reserve, Jerome Powell, brought an unexpected gift to the New York Stock Exchange. The stock market rebounded as it hinted at the possibility of a crucial monetary policy stance ahead of the Federal Open Market Committee’s (FOMC) regular meeting in December. In the market, I raised my head in anticipation that the ‘Santa Rally’, where the stock market rises even more during the end of year holidays and the New Year, is at its height.
However, stock market experts are wary of such ‘expectations’. Some predict that the New York stock market will show weakness until the beginning of next year. Although the pace of interest rate increases will be slow, the view is that it will not be easy for the stock market to rise given the slowdown in corporate performance caused by the high interest rate environment.
Meanwhile, although the US tax authorities have decided to withhold 10% of tax payment from foreign investors who invested in PTP (Publicly Traded Partnership) stocks, Seohak’s ant hopping continues.
I echoed Powell’s comments, but… Beware of hasty expectations
Since 1987, the month with the highest average monthly return of the S&P 500 index has been December, which the market expects to be called the ‘Santa Rally’. Contrary to investors’ expectations, Chairman Powell’s comments about adjusting the pace of interest rate hikes came in the depressed stock market as it continued to fall for three trading days at the end of November before December came in handy.
At the fiscal and monetary policy conference held at the Brookings Institution in Washington, DC, on the 30th of last month (local time), Chairman Powell said, “As inflation is close to a level sufficient to reduce it, reasonable to moderate. the pace of the rate increase.” It could be a monthly meeting,” he said.
The market reacted immediately to his comments. On this day, the Standard & Poor’s (S&P) 500 index rose 3.09% from the previous day, and the Dow Jones Industrial Average 30 rose 2.18%. In particular, technology stocks such as Apple (4.86%), Microsoft (6.16%), and Amazon (4.46%) were strong, and the Nasdaq index rose 4.41%.
It is interpreted that the market’s preference for risky assets has grown as the Fed, which continued to tighten intensively until last month, made it official to adjust the pace.
However, experts are of the opinion that it is necessary to lower expectations for the Santa Claus Rally, saying that it is difficult to give great significance to Chairman Powell’s comments. This is due to the fact that business performance will slow down as the economy slows down.
In fact, the Institute for Supply Management (ISM) manufacturing index in November was 49.0, the lowest in two and a half years. If the ISM manufacturing index is above 50, it is judged as an economic expansion, and if it is below 50, it is judged as a contraction.
“The slowdown in the economy will hurt corporate profits and drag the stock market down,” said Marco Kolanovich, chief strategist at JP Morgan.
Although the Fed is adjusting the pace of rate hikes, corporate interest costs that could rise as long as interest rates remain high for a long time lend credence to this forecast. Indeed, Chairman Powell said, “There is still a long way to go to stabilize prices,” and “we will control inflation by maintaining the base rate at a high level.”
Ahn So-eun, a researcher at KB Securities, said, “The key is how long the base interest rate will be maintained. It is fortunate that the pace of interest rate increases is controlled, but the high interest rate long-term is a separate issue.” We must bear in mind the possibility that our good financial position will not continue.”
Raw material ‘big liver’ Seohak ant… Buy even on tax advice
The US Internal Revenue Service (IRS) has decided to withhold a tax of 10% of the sales price when non-resident foreigners sell PTP stocks from January 1 next year.
A PTP is a partnership (combination) that can be listed and traded on an exchange. Unlike ordinary companies, 90% of the income generated is distributed to investors and a corporate tax exemption is provided. It mainly invests in raw materials and real estate.
It is expected that the investment burden of PTP stocks will increase due to the taxation method that imposes 10% of the sales amount regardless of profit or loss, but domestic individual investors do not stop buying.
According to the Korea Securities Depository, from the 22nd of last month to the 1st of last month, when tax-related information was seriously reported, domestic investors invested $15.59 million in ‘PROETF ULTRASHORT BLOOMBERG NATURAL GAS ( KOLD)’, which doubles the profit. when natural gas prices fall Jay made a net purchase.
In addition, he bought ‘PROSHARES ULTRA VIX SHORT TERM FUTURES (UVXY)’ for $3.41 million and ‘PROSHARES ULTRA BLOOMBERG CRUDE OIL (UCO)’ for $2.34 million.
As taxation will be implemented from the beginning of next year, it is interpreted to mean that investment will continue until the end of the year. However, as the price of raw materials is highly volatile, investors are likely to sell at a loss if the price drops suddenly. Accordingly, experts recommend selling PTP stocks within the year.
Kim Hoo-jeong, a researcher at Yuanta Securities, said, “Since there are only a few trading days left this year, we do not recommend new purchases of PTP stocks.” .
