Has Kim Hyun-seok’s Wall Street Now Dollars Hit the Bottom?

“If this is an adjustment, it is a very compassionate adjustment. So far.”

This is the diagnosis of Mike Santoly, a stock market critic at CNBC. Given that market interest rates have skyrocketed in the short run, the New York Stock Market is in a comfortable state.

In the New York bond market on the 12th (U.S. local time), the 10-year Treasury bond rate once soared to 1.188% a year, but the New York Stock Market quietly digested it. The Dow is up 0.19%, the S&P 500 is up 0.04%, and the Nasdaq is up 0.28%. It was a level to recover from a slight drop the previous day. On the 6th, the Democratic Party secured two seats for the senators in the Georgia state runoff and achieved a’blue wave’, and interest rates soared more than 20bp (1bp = 0.01% points) in the short term, but noticeable anxiety and tremendous shaken in the stock market. Does not appear.

A Wall Street official said, “At the beginning, there was a lot of concern that if the interest rate rises sharply, there will be a problem with the stock market valuation, but the market is digesting this well.”

Investors are refining their portfolios through’reflation trade’ in line with interest rate hikes and economic recovery trends while exploring future directions. The trend is to sell technology stocks that are vulnerable to rising interest rates, and buy bank stocks that benefit from rising interest rates, and energy stocks and industrial stocks that have a high return on stock prices when the economy recovers.

On this day, Facebook fell by an additional 2.24%, Apple fell 0.14% and Alphabet 1.07%. Western Texas Crude Oil (WTI) rose to the highest level since the end of February last year at $53 per barrel, with Exxon Mobil rising 2.22%. Financial stocks also rose significantly, with Goldman Sachs rising 2.9% and Bank of America 1.8%. The Russell 2000 Index soared 1.77% as the economy-sensitive small-cap stocks made a breakthrough.

Bank of America says its customers sold $2.4 billion worth of stocks in the week ended on the 4th, of which technology stocks were sold for $2.1 billion. Jeffreys expressed a’sell’ opinion on small tech stocks that are sensitive to interest rates, saying that interest rates will rise along with the economic recovery in the future.

The New York bond market is similar. On this day, interest rates rose to 1.188% per year in the morning. As interest rates rose due to a short-term surge, some of the buy demands were revived. The bid for a 10-year government bond worth 38 billion dollars, held at 1 pm on the same day, was issued at an interest rate of 1.164% with a high bid rate of 2.47 times. Accordingly, the 10-year interest rate in the distribution market also fell to the 1.13% level and ended.

One bond trader said, “The surge in interest rates in the short term has fueled demand for bonds,” he said. “We could stay in this band for the time being, but that won’t change the overall upward trend.” “More and more traders are gradually accepting the possibility of further gains in interest rates,” he explained.

This is because interest rates are now historically low. At such a low level, even if interest rates rise a little, there is no burden. A Wall Street official said, “Even if the nominal interest rate rises, the real interest rate is still negative, so it will not interfere with the economic recovery trend.” He added, “Assuming the economic recovery, it is normal for the long-term interest rate to be in the second half of 2% plus growth rate and inflation.”

The logic is that if money is released and the economy recovers, rising interest rates along with inflation are natural. Also, isn’t the Fed’s goal of 2% inflation?

It is predicted that the Fed will not move forward if the rate of interest rate rise is too fast to shock the financial market or soar above 2% and hinder the economic recovery.

In fact, Governor James Bourd said on the day that “the recent rise in 10-year Treasury yields is an encouraging sign for the economic outlook,” said Kansas City Federal Bank Governor Esther George, “As the economy recovers, inflation may rise faster than some expected. “It is expected that monetary policy will remain relaxed for some time,” he said. In addition, Cleveland Federal Bank Governor Loreta Mester said later this year that even if the economy is strong, there will be no need to change monetary policy.

A Wall Street official said, “If the vaccine continues to be supplied, the economy recovers, and prices are rising to the expected level, the Fed’s next move should be tapering.”

The dollar is changing with Wall Street’s ability to handle rising interest rates.

The value of the dollar, which has been weak for 9 months, is closing. The ICE dollar index, which fell to 89.1 last week, recovered to around 90s on this day. It is also based on rising interest rates (if interest rates rise, overseas demand will survive) and growing expectations for a recovery in the US economy.

Wall Street expects the Democratic Party’s’blue wave’ to accelerate the normalization of the economy. President-elect Joe Biden is formulating more stimulus and infrastructure deals. Goldman Sachs raised the US economic growth rate from 5.9% to 6.4% this year after the’Blue Wave’ was confirmed. As expected, if the U.S. economy thrives rapidly, the dollar could be strong.

A Wall Street official said, “The impact of’Blue Wave’ has already been reflected in the value of the dollar,” he said. “If the US economy recovers faster based on more fiscal spending, it is unlikely that the dollar will fall further.”

According to Bloomberg, Morgan Stanley held a’neutral’ position on the dollar on the 9th, saying, “Given the fiscal policy outlook, monetary policy outlook, growth and inflation outlook, etc., it is no longer attractive to position the dollar on a weaker dollar at this point.” Revealed. This reflects the Fed’s potential for taper, which could begin as early as June, along with increased fiscal stimulus from the Blue Wave. Wells Fargo also pointed out that “the dollar’s weakness has been excessive. A short-term reversal of the bearish trend is imminent.”

HSBC said today, “Right now, the sentiment of risk appetite is a major driver of the global foreign exchange market, but soon it will begin to react more to US Treasury yields.”

There is also a Chinese factor. China, which seemed to have controlled the coronavirus, recently blocked several cities in Hebei and other places. This could have a negative impact on the Chinese economy, which has been booming alone. In other words, the yuan is weakening. The won, which has been linked to the renminbi and has been strong, can also affect the won.

If the dollar turns strong, the global economy and the stock market could change. Usually the US economy has been relatively strong when the dollar has risen, and the global economy and the stock market have grown relatively faster when the dollar has weakened.

Reporter Kim Hyun-seok [email protected]