Deja Vu in the Current Stock Market, Reminiscent of the Second Half of 2021 - Is a Second Great Depression Imminent, or Not?

Looking back at 2021, Samsung Electronics first peaked at the beginning of the year, coinciding with the bottom of the won-dollar exchange rate, and the Chinese stock market also peaked first.

The domestic stock market, including KOSPI, rose further after the beginning of the year, peaking at around 3300 points in the first half of 2021, and then began to slowly decline.

On the other hand, the US stock market continued to rise until the end of the year, although it seemed to be about to fall. It only entered a correction phase in 2022, following the rapid interest rate hikes by the Federal Reserve since the beginning of the year.

The sense of déjà vu mentioned in the title refers to the feeling that, as was the case then, other stock markets besides the US market are falling first, only the US market is rising further, and the US market is approaching the end, squeezing out its remaining strength.

It feels like it has already gone its distance but has received a mission(?) to hold out until a certain point... that kind of feeling?

The S&P 500 index, a representative comprehensive index of the US stock market, feels somewhat more moderate than before, but the momentum does not seem to have completely run out yet...

The European stock market, another major economic bloc, has been unable to rise further from its peak in the first half of this year, seemingly strongly blocked, repeating a cycle of advancing and then being pushed back.

Japan's Nikkei index has reclaimed its past peak from the bubble economy of 1990 and is hovering around it, but I personally suspect that it is forming a large double-top pattern technically.

Even on a daily chart, it has fluctuated more than the European stock market, but it is stuck near the peak formed at the beginning of the year and unable to break through.

Meanwhile, the domestic stock market, including KOSPI and KOSDAQ, has been showing a weaker trend than other countries' stock markets since July, declining earlier.

And recently, while observing the price trends of the KOSPI, KOSDAQ, and representative companies like Samsung Electronics, I was suggesting that there is a high possibility of a year-end rally soon.

However, at the same time, I was also raising the question, "If the domestic stock market starts rebounding from here and goes into a year-end rally, will it truly be a positive thing?".

The highlighted portions in the KOSPI and KOSDAQ daily charts below represent the major long-term trend lines. Until recently, they acted as support lines, but the situation has changed, and we are now observing whether they are turning into resistance lines.

If the stock market breaks away from these long-term trend lines and plummets before recovering, it would be different, but if it falls slightly and then seems to be heading back to "re-test resistance," then is this really a good thing? This was the question.

Considering the current position of the US stock market, I believe the likelihood of the domestic stock market following such a trend is increasing.

In the short term, a year-end rally would be positive, but the possibility of a darker picture afterwards is increasing. In a worst-case scenario, the stock market in the coming year could be quite bleak, both in the US and domestically.

Below is the daily chart of the won-dollar exchange rate this year.

Since late September, when it had dropped to the early 1300 won level, it has sharply reversed and risen, and is currently facing resistance (or intervention by the Bank of Korea?) around 1410 won, experiencing a slight dip thanks to Samsung Electronics' large-scale treasury stock purchase announcement. In contrast, the KOSPI has rebounded somewhat.

Below is a wider view of the daily trend of the won-dollar exchange rate from the latter half of 2022 to the present.

Although marked for better viewing, it has shown a gradually upward-trending range-bound (upward channeling) trend since the beginning of 2023.

Given the length of time, a significant number of internal waves have formed. With this many nodes, we can expect the trend to break out of the channel, either upwards or downwards, in the near future.

Considering the current state of domestic corporate activity, the expected protectionism under a Trump administration, and the situation in the domestic real estate market, which direction do you think is more likely?

As mentioned earlier, a very significant line, the 1450 won level, is located not far from the current exchange rate.

Will another global economic disaster like the Great Depression occur, or will the concerns prove to be a mere incident and pass without major problems? It depends on each person's perspective.

Of course, the most important thing is whether "even if such an event occurs, the damage will be limited and not catastrophic."

Even if the probability of an event like the Great Depression actually happening is objectively low, looking at recent market indicators, I have a feeling that the impact may start surprisingly soon.

I think it's time to at least start considering minimal risk management.