Hello, viewers of Wall Street. Today, we have someone you really like, Mr. Lim Jae-seong, and we've prepared a comfortable interview. Hello! Today, we are especially grateful to LG Electronics for providing this location. This is a showroom promoting LG Electronics' Signature Kitchen Suite. I hope you all continue to love LG's built-in products.

First, I would like to start by discussing the recent stock market crash. At that time, many were surprised on Wall Street, and we were a bit shocked too. However, the market recovered very quickly after that. During the stock market's sharp decline, did Wall Street really think a recession was imminent? And how do you view the current situation? I didn't see it as serious, but since the stocks dropped significantly, if this continues, it could have a detrimental impact on the economy. However, naturally...

It didn't happen like that. In 1989, it was like that, right? The impact was severe, and after a year, the stock market slightly recovered, but due to that impact, a recession occurred in 1990. This time, it wasn't as severe, but the first carry trade was already identified as the cause. It was clear that the Bank of Japan was going to raise interest rates; that was the reason. Then, the unwinding of the carry trade happened severely, and the stock market collapsed. Interestingly, last week was a recovery week, and now we're in the second week. American companies are allowed to buy back their stocks every year. This year, they were permitted to buy back a certain amount of their stocks. However, since the stock prices kept rising, they couldn't buy the stocks. So, last week, they bought back 900 billion, which is equivalent to about 1,400 trillion won in stock.

Companies are all buying back their stocks, so that seems to be the beginning of the rebound. This week, they have continued, recovering almost 70% to 80% from the prices that dropped sharply. They have completely cut their losses, right? Yes. And the old carry trade keeps coming up in the news. Now, it's not just hedge funds; even wealthy individuals are participating. Why is that? Last week, there was a lot of concern about a severe market drop, and the Bank of Japan announced that they would not raise rates until the end of the year. But it wasn’t just a blanket statement of no rate hikes; they said it depends on the market situation. It seems like they gained strength from that, and everything is returning to normal. The carry trade is coming back in, and now it’s almost back to 150. If this continues, there’s a chance for another rate hike. Then, we’ll see how that unfolds.

I think stocks will recover this time, and the interest rate is at 4%. I expected bonds and stocks to recover a bit, but I have a feeling they might go sideways. Both good and bad data have come out. This morning, the housing data was very bad, and GDP has dropped below expectations. Now, finally, the probability of a recession within 12 to 18 months is increasing. However, we need to keep an eye on this because consumer data is not looking too good. So, I don’t know how good things are or how long they will last, but aside from consumer data, there isn't much good news. I think this is very important in the stock market. There have been several turning points; while some sectors are doing well, others are not necessarily getting worse, just not improving as much.

The SNP 490 is recovering, and excluding the four, until now, it has really been about either tech or financials. The other sectors were not doing well, but now they are on a recovery path. The growth in the sector is rising, while tech is coming down from a high position. It's still good, but it is declining. So, if we look at it this way, the question we need to consider is that until now, we just held onto the big names, but from now on, we need to think about equal weight. Since the beginning of this year, people have been talking about equal weight, and finally, will equal weight recover? Looking at a month’s data, tech is doing well, and when it rises, it rises together, but equal weight has performed even better. I think we should consider that. So now, if we buy an equal weight S&P 500 ETF, it might be a good choice because it is expected to perform better. However, I continue to think that way.

It's expensive, so this is a momentum market, and for the past 18 months, we have been in a situation where momentum is continuously rising. We just don't know when this momentum will end. If we're going to hold onto this, shouldn't we switch to weights? If we're going to go to indexes, those who are investing in stocks should consider other sectors rather than just the MAG 7 stocks. When looking at scale, you mentioned a preference in a recent interview. Yes, we've been making those adjustments since about a month ago. In the U.S., there are large-cap and small-cap stocks, and the Russell 2000 consists of many very small companies within the small-cap category. Out of the 2,000 companies, 40% of them are not profitable. However, it has the highest beta, so when it rises, it tends to rise significantly.

The S&P 600, which is a small-cap index, tends to rise a lot but also experiences severe drops. You can think of it as 600 companies above the 2000 mark. It's not entirely accurate, but the S&P 600 consists of smaller companies that are making money. The quality of these companies is somewhat better. The good thing about quality companies is that when they rise, they rise significantly. Currently, there's a rotation happening where many small-cap stocks have surged, but a month ago, before this upward trend started to decline, there was a substantial increase. However, I prefer mid-cap stocks. I don't know if this cycle will last 12 months or 18 months, but there’s a chance it could drop within six months. While it continues to do well until then, and momentum is in that direction, if the economy slightly improves, it could still lead to a significant downturn. That’s what I’m concerned about.

I think MiCap might be safer, or maybe it’s iWay. I looked it up this morning, but I forgot the ticker. RS Ping, or something like that. In fact, a similar ETF was recently launched in Korea; it's called the same family index, which a Korean company probably created. Next month, there's a strong possibility of an interest rate cut, and there's also the presidential election in November. Personally, I hope we can navigate this period of money well. I don’t think the presidential election holds significant meaning. I mean, I don’t attach much importance to it. There are those views, like if Trump becomes president, certain sectors will do well, and if Biden becomes president, other sectors will thrive. But I don’t invest that way, so I don’t see it as having much significance. Regarding energy, I think Harris's side is more favorable.

If it happens, Trump will probably go in that direction, so there is a bit of a financial aspect to it. However, that shouldn't be a concern. When it broke down, I felt that JP Morgan spoke a bit too hastily, suggesting that interest rates should be lowered during the intra-meeting without waiting for the next meeting. JP Morgan seemed to be hinting that it might break down severely, but both outcomes were possible. When it breaks down dramatically like that, there’s a way to recover, but it could have gone the other way as well. So, I thought it would be better to observe for about one or two weeks rather than rushing into investments. Fortunately, it rebounded, but I think it’s a temporary situation. I’ve been saying this for a long time, and now it seems to be heading towards the next level. Today, I noticed that the S&P is around 5,550, fluctuating between 5,600 and 5,200.

I think I'm going to sit next to 5,150 and 5,600 because it's a good place. There are good days and bad days, but even today, despite it being a bad day, the stocks are still going up, which is interesting. With the carry trade, when interest rates rise, I thought that U.S. bonds would be hit hard. I considered that, but it seems completely reversed. People aren't investing in U.S. bonds; they're buying U.S. stocks. So, during the retreat, the most affected were not the bonds but the stocks, and bond interest rates have actually gone down. But now that the carry trade is starting again, stocks are skyrocketing. This means people are borrowing money to buy U.S. stocks again, so if this continues, the Bank of Japan's interest rates...

I can raise it, but I don't want to cause confusion, so I won't. Yes, that's the first thing. I feel like it's splitting now. The market is slightly finding its pace, but it's no longer a downturn; it's over now. Mi Ri is a very famous person. The maestro is really pushing for the interest rates to be lowered quickly, saying that the pace is speeding up. However, the two members currently seem to be starting to adjust. They said that they are in favor of it, right? I still believe that we shouldn't lower the interest rates. Why? Because inflation could occur again. I think inflation isn't completely over yet, but if it does happen again, it's not something that can change overnight. So if...

If it happens, I'm worried about next year. So what I said last time when we were filming our video was that the trend is going downwards. I mentioned that by the end of the year, the 10-year bond would be at 4.2, and by early next year, it should go down to 3.8. However, we can't go down too much because if Trump becomes president again, there might be concerns about inflation, and he could take drastic measures. So I advised to invest cautiously. But everything happened as I said. Do you remember when Biden made mistakes during the debate? Interest rates shot up because of concerns about Trump and inflation, but then they quickly came down. I bought then. So, it came down quickly, and then because of the old situation, it dropped even further, maybe down to 3.7. So everything happened as expected, and I sold everything. Yes, I sold all my TLT. What's interesting now is that it seems like we're starting again, right? Back to that point.

It's going to be like this: Lilo, I fired the gun, but I think we need to go back to trading range. Bonds or lunches seem to be range-bound. They can't keep going up indefinitely, and stocks can go on for a long time. The prices in the 70s were really high, and even though they were expensive, they lasted for about 7 to 8 years before crashing. Of course, that happened in '87, and the tech bubble was also too severe. It lasted about 2 years before crashing by 80%. But I don't know about this one; I just know that it's definitely expensive. I remember comparing it to the tortoise and the hare. Those who can proceed quickly like a hare and invest, making money when prices go up and confidently exiting when they need to, are competing with hedge fund people. Others will just take a step back.

I'm not going to be greedy; I'll invest accordingly. So, it's okay for Cap. The reason is that U.S. stocks are expensive. The point that the index is expensive means that the tax is high. If you look at mid-cap stocks, they aren't that defensive; they aren't necessarily cheap either, but they aren't overly expensive. So, I'm still holding onto that sector. Last time on the broadcast, you mentioned that the dollar would converge around 120 to 140. Do you still see that outlook as valid? 

Currently, the government is targeting around 120 to 125, but they want it to be between 125 and 140. However, hedge funds are being too aggressive, so it can't reach that 140 level. Therefore, interest rates need to be raised. But to raise interest rates, inflation must first be confirmed, and since it hasn't been confirmed, they haven't been able to raise it.

As I got weaker, I had no choice but to increase the speed. Right? So, I raised it too quickly, and everything collapsed, so I decided not to raise it anymore. But I can raise it again by the end of the year, of course. And if the situation continues like this, there will definitely be a reason to raise it. However, there's one more thing that has changed since then. Kishida signed it, right? Why did he sign it? The conservative party in Korea had a firm grip on power, right? Up until about ten years ago, one side had dominated politics for 20 to 30 years. That's the case. The LDP, the conservative party, has been in control for decades. Kishida signed it because there will be elections in November. If he stays until then, the LDP could lose power, and the political landscape could change. So he needs to come out with another candidate.

You can hold a party, right? It's similar to the UK system. If the leader of the party loses, the party gets taken away. However, if only the leader changes within that party, it can still hold its ground. So, in this situation, there will be an election in September. Therefore, who comes out now is important because the LDP is so large. In the past, Abe was very influential and held the BOJ tightly. But Kishida is somewhat different; he's on the opposite side. Now, there's a woman whose name I forgot, but she is also from Abe's faction. Yes, yes, that person is from Abe's faction. So, we need to keep an eye on this because if she becomes the leader, it could mean a return to Abe's policies. If that happens, it will likely push the position back to a very easy 160 direction. Ah, speaking of which, there's a question about Trump that came up recently.

The president mentioned that he should bring part of the interest rate policy, right? Do you think that's a possible scenario on Wall Street? I don't think so, but I can't ignore the pressure because it's too intense. Trump really knows how to manipulate things that are legally questionable. So, while it's not a good situation, I can't dismiss it. When I asked questions like that, I thought it was really interesting. I took a taxi in Korea, and when it comes to international texts, you have to speak English. Some of the older drivers in their sixties or seventies seem to be doing it out of boredom after having done something else. They are well-educated. So, I casually mentioned that if you keep throwing money around, it could end up like Argentina. Argentina, a hundred years later, is on the list of the world's countries.

You didn't come to your seat, did you? Then that person said exactly that it was exactly 12 years. But that's correct; the event happened 100 years ago, but Argentina was doing so well that it went off the rails. It was doing so well that it kept the interest rates low and was flooding the market with money. That's what I said, this is the current situation, right? The country has completely messed up, and the U.S. is not doing any better. We have the reserve currency, and we can spend money like crazy, and foreign investors are buying our bonds. So, I feel like this will cause problems someday. But Trump could create such issues. I mean, he won't completely ruin everything, but when Trump was first in office, trade was very prevalent. Now, with Harris, the Vice President, coming up, there are talks about taking action.

I heard that right now, Trump's trade situation is somewhat uncertain. Yes, at this point, I can't trust the polls at all because they were all wrong before. But looking at the polls now, it seems that Harris is slightly ahead of Trump. However, this is all about swing states. In the U.S., there are 50 states, but California and New York are definitely Democratic, while Texas and some other states are firmly Republican. The swing states are the ones that ultimately decide everything. So, it seems that Harris is gaining a bit more traction in the swing states, while Biden lost everything to Trump. Especially when he messed up in the debates, everything shifted towards Trump. But now, it seems to be turning back towards Harris. We will have to wait and see, as there is a debate scheduled for the end of September.

Harris still hasn't opened his mouth about Trump, so we have to wait and see. It's just that he has this charming appearance that makes him popular. Trump has made more mistakes; he unnecessarily attacked Black journalists from the start. He suddenly started saying things like, You're Black, to gain an advantage. If we look at the overall atmosphere, if a recession doesn't hit by the end of the year, it seems like the mood could turn in favor of Harris. However, a recession is definitely a problem, especially if the economy weakens. The economy is holding up fairly well, but the funny thing is that in the U.S., about 20% to 30% of people have been in a recession for about a year. So, even though they are working, prices are too high, making it hard for them to live. Meanwhile, wealthy people are flying around and traveling in business class, and there are no seats available anywhere, creating this kind of situation.

People lead the economy, and that's true, but right now, there are problems in the UK as well. Because of fake news, poor people are getting really angry, and the issue with immigrants has been highlighted as fake news. Suddenly, people are setting cars on fire in the streets, and that was two weeks ago. It happened in London, UK, on a Thursday in the financial district. They told everyone to go home, and on Wednesday, they said that you don't have to come to work the next day. It seems like the same situation is developing in the US. When I walk to work, which takes about 20 minutes, I really see a couple of homeless people on the streets. The numbers are increasing, which wasn't the case before. This shows that the situation is worsening.

[불앤베어 포커스] 미국인 30%는 이미 경기침체. 스몰캡 사면 안되는 이유 | 윤제성 뉴욕생명자산운용 CIO | 1부

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[불앤베어 포커스] 미국인 30%는 이미 경기침체. 스몰캡 사면 안되는 이유 | 윤제성 뉴욕생명자산운용 CIO | 1부

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