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

(The latter half, Part 2, is divided from Part 1 below)

The chart below shows the proportion of federal government spending to GDP (purple line) from the early 2000s to the present.

Following the Global Financial Crisis, in the 2010s, due to strong deflationary pressure, the spending ratio remained higher than before the financial crisis. Even after 2022, following the immediate aftermath of the Corona crisis, the spending ratio remained higher than in the latter half of the 2010s, when deflationary pressure persisted.

It is highly likely that this high spending ratio is one of the main reasons why the US economy has not cooled easily despite high interest rates, and residual inflation is not easily contained.

Perhaps Trump and Musk, contrary to market concerns that they would recklessly issue national debt, at least in the early stages of their administrations, intended to lower the spending ratio to a level of ‘balanced budget’ compared to the Biden administration, aiming to tackle inflation first. That is the point.

However, the problem is that although it is said to be strong, looking at detailed economic data such as employment, we are in a situation where a slight slowdown could lead to recessionary concerns.

The fact that tackling inflation first, at least in the early days of the Trump administration, might push the economy, which has been holding up until now, into recession is a point of concern, and it seems likely that this will happen given the current trend.

The initial intention might have been to briefly push the economy into recession, extinguish inflation, and then blame it on the Biden administration, gradually reviving the economy afterwards. However, the underlying problems in the American economy, caused by prolonged high interest rates but not clearly visible, may be unexpectedly large, and the intended ‘push into recession and then reboot’ scenario may not work as planned, and there is a slight possibility of a double-dip recession.

In the case of failure of the initial intention to briefly push the economy into recession and then recover, leading to a double-dip recession, this scenario could lead to a Great Depression-level crisis in the American economy…

Now, back to the domestic stock market…

Below is a long-term monthly chart of Samsung Electronics. Since early September, massive continuous selling by foreigners has caused a deviation from the long-term trend.

This may appear to be a simple stock price movement, but when leading stocks or indices take this path, it has often been a significant advance warning sign, judging from past history.

The KOSPI index monthly chart below also shows a situation where it seems to have slightly deviated from one of the long-term trend lines,

The KOSDAQ index also shows a similar trend to the KOSPI index. Since the KOSDAQ index has a relatively shorter history compared to the KOSPI index, the trend appears to be even clearer. The trend is ‘deviating from the long-term trend’.

There is another noteworthy point in the trend of the KOSDAQ index monthly chart below. There is a slightly downward-sloping channel drawn with a black highlighter.

I previously mentioned about the US stock market, that it was in a ‘large long-term box range at the high point before entering the Great Depression endgame’.

The same is true for the domestic stock market. However, while the US market is in a large box range that is moving sideways or slightly upward, the domestic market is weaker, and I have been observing a slightly downward-sloping box range since mid-2021.

Until the confirmation of Trump's election victory, I expected a direct fall to the bottom of that channel before the end of this year. The KOSPI also showed a similar trend.

However, as seen in the daily charts of Samsung Electronics, KOSPI, and KOSDAQ above, there is now a higher likelihood of a short-term rebound and upward trend from here.

Let's reconsider this.

‘If a short-term rebound occurs here, and it does not reach the bottom of the channel shown below, and the upward trend continues until the end of the year and the beginning of the next year, is that a good thing?’ This is a question about the meaning of technical trends.

What if, instead, it pauses in the middle, conserves its strength, and deviates from the medium-term channel several months later?

There is no single answer, so it seems necessary for each person to think about what will happen next. However, these recent trends lead me to believe that ‘the start of the Great Depression endgame has been significantly accelerated.’

Therefore, if the short-term bullish trend in the domestic or US stock market continues until around the end of the year and the beginning of the next year, or shortly thereafter, and then loses momentum, the endgame could begin, and from then on, the situation could transition to one that requires even greater caution than it has since mid-2021.

The domestic stock market, and especially the real estate market, seems to be in a bear market, but the truly fearful bear market has yet to begin. It's simply in a slightly downward-sloping box range due to concerns about future export and domestic demand slumps.

In particular, if more signs emerge from US economic data that suggest ‘next year's concern seems to be deflation rather than inflation,’ this will likely be the case. However, in the future, securities firms will probably continue to encourage individual investors to buy, claiming it's a temporary adjustment.

If the domestic stock market experiences a period of rebound in the short term, and then the market sentiment suddenly shifts after that rebound ends, are domestic investors prepared? This is a thought from a medium- to long-term perspective.

Medium- to long-term investors, whether in stocks or real estate, seem to be entering a market where they absolutely cannot be shaken out. Stock investors should set a clear stop-loss point, rather than long-term investment, and approach the market accordingly, both in the domestic and US stock markets.

Simply put, it is worth considering ‘why the exchange rate keeps fluctuating and why Warren Buffett's Berkshire is rapidly accumulating unprecedented amounts of cash.’