Economic Outlook and Investment Strategies for Q4 2023

Economist Hong Chun-wook emphasizes the importance of strategic investment and risk management in the fourth quarter.

### Economic Insights and Investment Strategies for Q4 2023
* 📉 I anticipate a **50 basis point interest rate cut** this year, suggesting a break in November followed by a reduction in December for **more effective policy changes**.
* 💼 As an economist, I emphasize three critical areas for individual investors in Q4: **macroeconomic events**, **tax-saving investments**, and **risk factors**.
* 🗳 The upcoming U.S. presidential election, the Federal Reserve's meeting, and the Bank of Korea's monetary policy are vital macro issues that will **impact investment decisions**.
* 💰 Tax-saving options like the Comprehensive Asset Management Account (ISA) and Individual Retirement Plans (IRP) should be considered as year-end approaches to **maximize tax benefits**.
* 📊 Investors should be cautious of financial investment income tax and potential sell-offs by major shareholders in the KOSDAQ due to the **complexity of our tax system**.
* 🤔 The "shy Trump" phenomenon suggests that support for Trump may be **underestimated**, which could introduce **geopolitical risks and market uncertainty**.
* 🎄 The potential for a year-end market rally, known as the "**Santa Rally**," is uncertain and will largely depend on the **economic outlook** and the outcome of the **U.S. presidential election**.
* 💳 I recommend prioritizing **ISA accounts** for investments, followed by **personal pension savings** and **IRP accounts**, while emphasizing the importance of **risk management and asset allocation** as we approach the end of the year.

I now expect that they will lower the interest rate by 50 basis points within this year, so it would be best to take a break in November and have a rate cut in December. Lowering the rate each time during meetings is less effective than taking a break and then lowering it. Moreover, the fact that they are considering a freeze itself indicates that the economy is quite good. For now, they have indicated on the dot plot that they will lower the interest rate by 50 basis points this year, so I am paying attention to the new style of policy changes in the interest rate.

Now, the second point is, hello, I am economist Hong Chun-wook. Today, I would like to discuss the direction that individual investors in our country should pay attention to in the fourth quarter. There are three main points. First, of course, are macro issues: the U.S. presidential election in early November, the U.S. FMC in December, and the Bank of Korea's monetary policy in October, all of which are pressing economic issues that affect investment.

You need to check this carefully. The second point is that as the year-end approaches, you shouldn't forget about tax-saving investment options. Recently, I've been emphasizing the Comprehensive Asset Management Account (ISA). If you have the capacity, you should also consider studying or investing in additional products that provide tax deductions, such as pension savings or Individual Retirement Plans (IRP). Lastly, the third point concerns risk factors. There is also the financial investment income tax, and particularly at the year-end, there are significant sell-off activities by major shareholders, especially in the KOSDAQ. This situation arises because our country's tax system is somewhat complicated. As we try to patch things up, this has become the reality. Nonetheless, it's essential to keep an eye on the major shareholder sell-off and various tax-related sell-off pressures that can occur at the year-end. These are important checkpoints to consider.

I would like to start with the first interest rate cut. I expect that this year, they will cut the rate by another 50 basis points. So, I think it would be best to take a break in November and have the rate cut in December. This would be very good because reducing the rate every time there is a meeting is less effective than taking a break and then making a cut. Moreover, the fact that they are considering a freeze indicates that the economy is doing quite well. They have already indicated on the dot plot that they will cut the rate by 50 basis points this year, so while keeping that promise, I am interested in this new style of policy change that involves making cuts less frequently rather than every month.

Now, the second point is about the U.S. presidential election. There is this concept of shy Trump and hidden racists, right? Did you know that President Obama always had lower vote percentages than his approval ratings?

We now refer to it as the hidden racist phenomenon. The more we search using terms like black, the lower the actual voting rate of President Obama seems to be according to various studies. This indicates that there are still many people in the United States who hold racist views. Additionally, the issues surrounding candidate Harris being of mixed race are problematic. Furthermore, in the elections of 2016 and 2020, President Trump actually garnered a higher voting rate than his approval ratings suggested. We now refer to this as the shy Trump phenomenon, and while it may be decreasing, I believe there will still be Trump votes that polls fail to capture. Considering this, I think Harris is still at a disadvantage of about 10% compared to Trump in this election. Therefore, when looking at these factors, we should be mindful of the support rates.

There are parts that you need to pay attention to. If the possibility of Trump becoming president increases, we need to be mindful of geopolitical risks from our perspective. These aspects will create uncertainty in the market. It would be good to keep these things in mind. As we approach the end of the year, there is some anticipation for next year in the U.S. regarding capital gains tax. Investors might realize losses on their investments to offset profits, and after those sales, they often start buying again. This has the effect of adjusting the purchase price. Therefore, at the end of the year, there tends to be a market rally, especially among small-cap stocks, which is referred to as the Santa Rally or year-end effect. There is a possibility of that happening, but it will depend on next year's economic outlook.

It is a concerning situation where the Federal Reserve may need to raise interest rates due to poor economic forecasts. We should consider whether a Santa Rally can happen easily under these circumstances. As I mentioned earlier, it is a time to think about how the Federal Reserve's economic outlook is changing. Personally, I believe that the U.S. market has risen too much this year, and whether we will see a Santa Rally will depend on the results of the upcoming U.S. presidential election. Discussing a Santa Rally at this moment seems premature to me.

I recommend looking into ISA accounts, particularly brokerage-type ISA accounts. The annual limit is 20 million won, which is generally the maximum savings amount for most salaried workers. I suggest considering investing this amount. If there is still money left after that, we can think about the year-end tax settlement for the account.

The limit for receiving funds in the account is up to 9 million won. If you contribute up to 9 million won through a personal pension savings account and an IRP account, you can receive an end-of-year tax benefit of up to about 1.3 million won, depending on your income level. It would be good to take advantage of this as well. However, personal pension accounts and IRP accounts provide generous end-of-year tax benefits, but there may be penalties when withdrawing funds, so careful consideration is necessary when enrolling. Therefore, if I had to suggest an order, I would recommend starting with the ISA account if you have extra money, followed by personal pension savings, and then the IRP account. Of course, for those like me who are nearing the withdrawal age for pension savings, it would be best to prioritize pension savings first. For reference, from age 55, after five years of enrollment in the pension savings, you can start withdrawing.

If you go beyond that, you can withdraw from your pension savings or retirement pension. So, I think it would be good to consider that part and set the order for your investments. It really makes me feel gloomy to think that there are only three months left this year. As I get older, I find myself feeling more and more depressed. I hope you all finish the fourth quarter well so that you have no regrets. I am especially proud of the achievements that come from betting on certain assets. It’s not easy for that to lead to continuous investment choices. In that sense, I hope to take an interest in risk management and asset allocation that involves diversifying risks as we enter the fourth quarter of 2024. I wish for great investment success for all of you and your families. Thank you very much for listening.

4분기 시장, 개인투자자가 알아야 할 자산 투자전략을 알아봅시다

"환율의 미래"와 "프랑스 탐방기" 등 10여권의 책을 쓴, 이코노미스트 홍춘욱입니다. 25년 넘게 이코노미스트 일을 하면서, 반복되는 질문에 답하느라 힘들었는데.. 동영상을 통해 자주 묻는 질문에 대해 쉽게 답하고자 합니다.


*비지니스문의 : hong8706@us-all.co.kr
*강연 문의: https://c11.kr/19l7h


홍춘욱의 경제강의노트

Interest Rate Predictions and Investment Strategies

The expectation is for a 50 basis point interest rate cut by December, with a break in November being more effective.

presidential election and the Bank of Korea's monetary policy, are crucial for individual investors to monitor in the fourth quarter.

Tax-saving investment options, such as the Comprehensive Asset Management Account (ISA) and pension savings, should also be considered, along with being aware of year-end sell-off activities by major shareholders in the KOSDAQ.

The speaker anticipates a 50 basis point rate cut in December, suggesting a break in November for a more effective policy change.

They discuss the "hidden racist" phenomenon related to Obama's lower voting percentages and the "shy Trump" phenomenon, indicating that both candidates may have more support than polls suggest.

The speaker believes Harris is at a 10% disadvantage compared to Trump in the upcoming election, highlighting the importance of considering support rates.

Geopolitical Risks and Year-End Market Trends

The possibility of Trump becoming president may increase geopolitical risks and market uncertainty.

As the year ends, investors often realize losses to offset profits, leading to a potential market rally, especially among small-cap stocks.

The Federal Reserve's economic outlook and interest rate decisions will play a crucial role in determining the likelihood of a Santa Rally.

Maximizing Tax Benefits and Planning for Retirement

The limit for receiving funds in an account is 9 million won, offering an end-of-year tax benefit of up to 1.

It's recommended to start with an ISA account, followed by personal pension savings and then an IRP account, especially for those nearing the withdrawal age.

Withdrawing from pension savings can start at age 55 after five years of enrollment, making it important to consider the order of investments carefully.