Is a Year-End Rally in the Domestic Stock Market Really Good News? - Thoughts on the Possibility of a 2025 Global Depression [1/2]

Let's ask the same question as the title suggests.

‘If the recent unstable KOSPI and other domestic stock markets start to rebound and even lead to a year-end rally, would it be entirely good news?’

Of course, from a short-term perspective of about 3 months, it's good news. The fact that the domestic stock market, which has been continuously plunging recently, is rebounding means that the stock prices of many large and medium-sized companies are likely to rise as well.

However, the question's implication goes beyond the short-term perspective. When considering a period of roughly 3 months to a year as a medium-term perspective, the question is whether it's good news from that standpoint. (Long-term perspectives of several years or more are considered negligible and excluded from this article's content).

Samsung Electronics, a leading domestic company and a major contributor to South Korea's foreign exchange earnings, closed at 49,900 won on Thursday and then achieved a sharp rebound of about 7% on Friday, despite the plunge in secondary battery-related stocks.

In the absence of significant news, I had anticipated that the stock price would eventually reach or briefly fall below the 49,000 won lower line by early next week. However, the news of a share buyback that came out in the evening makes it more likely that it will not fall to that level in the short term. (If the stock price were to fall to 49,000 won during next week, a sharp rebound like Friday's is likely to occur again).

Even if Samsung Electronics continues its upward trend, it is likely to hover around the low 50,000 won range for a while early next week before making significant moves.

Although the US stock market, particularly the Nasdaq, experienced a significant decline on Friday, the domestic and Asian stock markets are expected to open without much impact on Monday.

It's unclear if it's solely due to the Samsung Electronics effect, but as shown below, the KOSPI night futures, while retreating somewhat from its intraday high, closed almost flat compared to the afternoon closing price on Friday, suggesting a strong possibility of a flat opening on Monday.

Judging from the trends of Samsung Electronics and Friday's night futures, both the KOSPI and KOSDAQ are more likely to show support around the lows of the sharp decline in early August.

Even if the recent correction in the US stock market ends soon and at least enters a sideways trend, the domestic stock market appears to be entering a phase where it can seek a short-term rebound.

One of the main reasons for the recent correction in the US stock market was the "concerns about long-term inflation due to concerns about the Trump administration's fiscal deficit and the resulting rise in market interest rates."

Regarding these concerns, former KBS reporter Jong-hoon Park explains the warning about inflationary pressure in a video he posted today on his "Ji-sik Hanbang" channel.

However...

Observing the market indicators since right after Trump's election, I'm questioning whether the inflation of the Trump era has reached its peak and whether we are rapidly shifting towards concerns about future deflation (recession).

One of the points Nefcon has been making recently is that the 4.5% interest rate line for the 10-year benchmark is the level the bond market will react to.

Market interest rates, which rose sharply until just before the US presidential election, have not surpassed the 4.5% line since Trump's victory was confirmed.

While it hasn't crossed the 4.5% line for several days, the continued threats of it doing so have put pressure on the stock market.

Yesterday, Friday, also saw an attempt to break through the 4.5% interest rate line during trading, only to be pushed back.

The Maeil Business Newspaper's Wall Street Monthly video below explains the unusual trend observed in the bond futures market yesterday.

Somewhere, someone judged that the market interest rate was high enough (believing it wouldn't rise further) and made a large bet of over 2 trillion won in one go during trading. Why did this investor do this...?

The prevailing market narrative has been that "the Trump administration's tax cuts and tariff bombs will lead to a large fiscal deficit, causing market interest rates to surge."

But is that really the case?

I suspect that Elon Musk's campaign speech in support of Trump, which appeared in news articles just before the US presidential election and was reported to be acting like Trump's confidant, might be a preview of the Trump administration's early actions.

Most people probably remember the article as saying that Musk predicted a temporary stock market crash once the Trump administration was confirmed.

However, parts of the article talk not about large-scale tax cuts or government bond issuances, but about "fiscal tightening" and "balanced budgets." This is the opposite of what's currently being discussed in the market.

This makes me think that at least for the first year or so of the Trump administration, the focus will be on tackling inflation (price increases), the issue that people under the Biden administration complained about the most, and I suspect that Musk expressed this indirectly.

...Due to capacity issues, the latter part will be in Part 2.