Thoughts on the Market After the US Presidential Election [ft. Is the US Stock Market Peak a Little Further Ahead?]

The 2024 US presidential election, considered an even bigger event than any previous US election, has finally concluded, and a week has passed since Donald Trump was declared the winner.

Seeing the largely different reactions than expected, I have slightly altered my short-to-medium-term market view, which was previously focused on the US stock market. I'd like to briefly write about that.

Of course, these are my very personal thoughts, so take them with a grain of salt.

Looking at the market's reaction immediately after the US election, what surprised me was that while I expected the US stock market to rise again after the election, it would only be slightly higher than the October peak. However, it rose much more after the win was confirmed than I had anticipated. Also, surprisingly, despite the continued concerns about the fiscal deficit related to Trump, the market seemed not to worry much about a resurgence of inflation in the medium to long term.

1. I had anticipated that the mid-to-late October peak could be the long-term peak for the US stock market, but it seems the index will rise further to create a new high. However, it also appears that the start of the main event (a long-term bear market) is closer.

As I mentioned in the post below a while ago, I thought there was a high probability that the higher of the two peaks, either October's high or the one that might appear after the election, would be the long-term peak. However, the market's reaction after Trump's victory surpassed that level, and other market indicators I was watching changed dramatically.

This leads me to believe that one more high point may be created. And, considering the technical position and flow, I suspect the next high point will be "very sharp like a spire," and it will be the finale.

The reason for this change in thinking is not simply because the stock market's rise immediately after the election result confirmation was large, but also because indicators such as VIXM (mid-term volatility) shown in the chart below showed a significant decline and breakouts.

As in my previous post, the breakthrough of Ethereum's resistance line, which previously suggested that further gains after November would be difficult, can be seen as another market indicator with similar meaning.

2. The US stock market will likely raise the peak higher, but it seems to "accelerate the timeline."

Until recently, I have been writing that even if the long-term peak is reached now, it wouldn't immediately lead to a long-term bear market.

If the US stock market continues a frenzied, explosive rally from now until early next year, my outlook will change significantly. I mean, after that rally loses steam, it could immediately enter a long-term bear market.

Previously, I thought a fairly long period of consolidation, perhaps a few months to a year, would follow before a decline. But that part seems likely to change. Of course, the long-term bear market I'm referring to here is not a typical recession, but a long-term crash like the Great Depression.

Therefore, even the domestic real estate market, which I thought had more time, if a decline in prices and a lack of transactions becomes apparent soon, those who intended to sell might be unable to do so due to the lack of buyers, and therefore find themselves stuck. Now, we need to be extremely cautious about the real estate market…

Looking at the graph of Berkshire Hathaway's rapidly increasing cash reserves that I saw recently, right after the confirmation of Trump's win, I suddenly thought, "Oh, my god, is this why Buffett is acting so hastily...? "

3. The domestic stock market seems even more ambiguous.

Regarding the KOSPI index, if the US stock market corrects after the election, I had imagined a scenario where it would fall below the current long-term trendline, briefly dipping below 2,000 points before slowly recovering.

With the US stock market likely to rise further, the KOSPI feels a bit inflated.

Normally, I would expect a considerable rebound here following the US market, but since Trump's victory, besides positive factors for the stock market such as tax cuts, there is also the aspect of "America First," which is causing the stock markets of other countries like Europe to suffer due to concerns of reduced trade. It makes me question whether the domestic market can follow suit.

Even if the US stock market booms, the domestic stock market might only maintain a calm, firm upward trend.

My view on Samsung Electronics has also changed along with the overall domestic market. If a rebound occurs by early next year, I think we should consider a long-term exit strategy. This applies to the US stock market as well.

4. From next year, what the US needs to worry about might not be inflation, but deflation.

The video below shows a segment from yesterday's Yonhap News TV discussing the economic situation after the Trump administration, featuring Moon Hong-chul, team leader at DB Financial Group, and Yoon Yeo-sam, department head at Meritz Securities, as guests.

In the middle, there is a discussion on the topic of whether the US should worry about inflation or deflation next year. The two guests had slightly different opinions.

Moon Hong-chul argued that the main concern should shift to deflation, while Yoon Yeo-sam expressed a somewhat opposing view, using the word "uncertainty." However, the nuance of his remarks suggested that he still sees a resurgence of inflation as a major concern.

Which opinion do you agree with?

Based on my observation of the current market reaction in interest rates and commodity markets immediately after the election result, I would side with Moon Hong-chul's opinion.

This is because, assuming that the Trump trade surged most strongly after Trump's confirmation, the market's trend doesn't seem to show much concern about inflation compared to the trend leading up to the election. (This is purely my interpretation.)

It feels like the prevailing sentiment is that even if Trump enters the White House, if the US economy falls under the influence of a recession, inflation will inevitably die down.

The point of this posting is that if the US stock market shows a significant upward trend from now until early next year following the US election, it would be wise to be cautious about risks from a long-term perspective as well as a short-term one. In the domestic market, this includes real estate… High-leverage real estate is extremely risky now.

To verify the worsening situation in the future asset markets, including the stock and real estate markets, it might be useful to observe the movement of the won-dollar exchange rate.

That is, when it breaks through the point indicated below. It's roughly in the mid-1400 won range. I think that if the won-dollar exchange rate breaks through that line on a monthly closing basis, the US stock market would have already passed its long-term peak and would be at the entrance of a long-term bear market.