I expected a short-term adjustment to come from the end of June to July or August. In April, the 10-year government bond yield soared to 4.7%, creating a temporarily tight monetary environment. As a result, from May, the growth rate slowed down, the unemployment rate rose, and prices fell. Therefore, I mentioned that concerns about an economic downturn would dominate the market in the third quarter. I believe that this fear of an economic slowdown is merely a superficial reason for a short-term correction. So, I think there are other reasons behind this, and among them, the most crucial reason is the reduction of liquidity. I expected a short-term correction to enter the market at the end of February or in March or April. At that time, I explained that in the second quarter, the issuance of short-term government bonds would decrease, while the issuance of long-term government bonds would increase, leading to a reduction in liquidity.

I mentioned that there would be a temporary contraction, but looking at the 3rd quarter government bond issuance plan, the short-term bond issuance will actually increase in the 3rd quarter. So theoretically, there will be additional liquidity in the 3rd quarter. How can there be a liquidity contraction in August? I would like to share my thoughts on this with you. So let's start. The Ministry of Finance has been increasing short-term bond issuances since 2023 to increase the money supply by increasing the currency velocity. As expected, the short-term bond issuance will also increase in the 3rd quarter. Superficially, liquidity will continue to be supplied in the 3rd quarter. However, what concerns me the most is the FMC in July.

Powell testified before the Senate and House hearings and hinted at a rate cut. Powell mentioned that it would be a problem if rates were lowered too quickly or too slowly. Therefore, the market accepted that they would start the rate cut in the September FOMC meeting. If you look at the Fed Watch chart, the market is currently pricing in a 90% chance of a rate cut in September. Now, the issue arises from here. If the Fed officially hints at a rate cut in the July FOMC meeting, they will likely cut rates in the September FOMC meeting. This creates a gap of about one month, leading to issues. Currently, the 1-month and 3-month short-term government bond yields are around 5.3% to 5.4%, and the overnight rate is at 5.3%.

We will start going down. However, the interest rate in England has been fixed at 5.3% until last month. So, short-term interest rates can momentarily go down below the English rate. The problem is that the Ministry of Finance has been increasing short-term debt issuances, supplying liquidity to the market. In this process, hedge funds have been buying assets with significant leverage. In simple terms, hedge funds purchase a 1-month government bond at 5.4%, then use the same money to borrow through the repo market at around 5.33% interest. Then they buy the 1-month government bond again at 5.4%. This process is repeated 100 or even 1,000 times without limits.

You can safely raise a very high return with little money because if you repeat 100 times by 0.1, a profit rate of 10% will occur. In this way, redemption funds have been continuously purchasing short-term bonds. If in July, the FMC interest rate officially indicates that the short-term national interest rate falls below zero, redemption funds will no longer be able to purchase short-term national bonds unlimitedly. In that case, in August, there will be a shortage of short-term national bonds. Instead, there is a high possibility that funds that have purchased short-term national bonds will face a 0% concentration risk. Because if you receive 5.2% for short-term bonds, putting it at zero will make it 5.3%. Rather than buying short-term bonds, it's better to just leave it at zero. If this happens, there may be a sudden liquidity squeeze in the market for a month in August.

I expect that there will be a short-term correction in the stock market. Of course, on the surface, fears of an economic downturn are expected to dominate the market along with the Trump issue. However, deep down, I anticipate that the liquidity contraction caused by short-term interest rates falling below long-term rates will outweigh the short-term correction. Therefore, a short-term correction could continue until mid-September, when the FOMC meeting is scheduled. There will be a Jackson Hole meeting from August 22nd to 24th. If the correction deepens in August, the Fed is likely to come up with measures at the Jackson Hole meeting. So, currently, I expect around August 24th to be the bottom, but second-quarter earnings will be announced. As you all may know, NVIDIA is showing explosive revenue and operating profit growth rates. If NVIDIA's performance falters, other stocks will also be in trouble.

I'm scared. So, in the end, for the stock index to rise further in the future, NVIDIA has to rise. That means the stock price needs to re-enter the rising momentum by the end of August. Therefore, I think the stock price might hit bottom around August 24th. However, there is a way to avoid liquidity tightening in August. So, we need to consider the second option. The second option is to implement an interest rate cut by the FOMC in July. If the interest rate cut by the FOMC in July happens, the domestic interest rate will also drop by 0.25%, just like short-term government bond rates. In this case, short-term government bond rates can stay above the federal funds rate. Therefore, you should keep in mind the possibility of an interest rate cut by the FOMC in July as the second option. However, in order for the interest rate cut by the FOMC in July to continue, on July 30th...

Alternatively, by the standard of July 30th, SNP should have dropped by at least 5 to 6% from its peak. If there is a decrease of around 5 to 6% from the SNP peak on July 30th, an interest rate cut by the FMC in July should be implemented. If not, in August, if short-term government bond yields fall below zero rates, causing problems in the short-term government bond supply and liquidity rapidly dries up, stock prices will further decline. If the bottom of the SNP rising channel is broken, it will not be able to maintain an upward trend until the presidential election. As a result, if stock prices do not rise significantly before the presidential election, the likelihood of the Democratic Party suffering a defeat will increase. Therefore, I believe it is essential to pay attention to or actually implement an interest rate cut by the FMC in July. Today's content was quite challenging. I wonder if my thoughts have been properly conveyed to you.

I don't know. Well, if I may say one last thing, we cannot know for sure if the short-term bottom will be in July or August. Depending on the decision the Fed makes at the July FOMC meeting, July could be the bottom, or it could be August. However, one thing we can be sure of is that if a short-term correction comes in July or August and the stock prices plummet, it is not the time to sell but rather an opportunity to buy. Therefore, even if the stock prices fall, I believe there is no need to be afraid. I expect both stocks and bonds to be shocked by the presidential election. Therefore, I think you can enjoy this bubble. Just a reminder, as always, this is my personal opinion, and there is a high possibility that I am wrong. I hope you can just see this as how this person thinks. Well then, let's wrap up today's video here, and I will continue in the next session.

8월 유동성 위기 온다? 단기 조정의 근본적인 이유 (국채 수급 문제, 역레포 충전)

8월 유동성 위기 온다? 단기 조정의 근본적인 이유 (국채 수급 문제, 역레포 충전)