Hello, this is Yoo Dong-hoon. Let's start Yoo Dong-hoon's Global Insight broadcast on June 9, 2024. Yes, we have entered June. May was not a weak month like Celine May, but a very strong May. Towards the end, there was some manipulation in the last week, which made many people doubtful and worried. However, the flow of the first week of June is showing a strong appearance once again. Looking at the trend of the US stock market last week, the Dow Jones slightly rose. However, the S&P 500 and especially the Nasdaq, particularly Nasdaq 100, showed a significantly high increase. The S&P 500 rose by 1.3%, Nasdaq by 2.36%, and Nasdaq 100 by 2.5%. As a result, in terms of returns compared to the beginning of the year, Nasdaq is showing the highest increase, with a significant increase of over 14%.

The NASDAQ is rising rapidly now with a 13% increase. Meanwhile, the movement of the Russell 2000 remains sluggish. Last week, among the Russell 2000 small-cap stocks, only a 2.3% decrease was recorded, keeping the return rate almost at 0% compared to the beginning of the year. When comparing these numbers to the Korean stock market, there seems to be a slight similarity. As I have mentioned before, Korea is showing a movement similar to the Russell 2000 in the US. In this context, how should we respond to the future trend? The flow of May will lead to June, and historically, June tends to rise, continuing until the end of the year. There is an 80% probability that this month will also rise, and looking ahead.

By the end of the year, there is a probability of around 70% that it will rise by an additional 10% or more, close to 13%. So, this is talking about the average in the past. However, what we need to focus on today is whether the market will become overheated or move towards a somewhat stable rise rather than a decline. Instead of a sharp drop, there seems to be some catching of breath, then rising again, catching breath, and rising. Should we expect this trend to continue or will there be a significant rapid increase? We need to discuss some aspects related to this. Looking at the numbers that are continuously coming out, rather than a sharp increase, it seems to be rising, taking a break, rising again, taking a break, and continuing like this, leaving open the possibility of an additional 10% increase by the end of the year. Therefore, we believe that we need to examine the market and keep an eye on it. So,

The part we need to pay attention to right now is whether the phenomenon of a reverse in the growth rate of loans is happening because of the joke of the second-hand market, I don't know, but the growth rate of loans is still not increasing significantly. The growth rate of loans should increase significantly to prevent a bubble. Currently, looking at the growth rate of loans, compared to the same period last year, it is barely in the low single digits, around 1%. It would be worrisome if it increased by 5% or 10%, but it does not seem to be the case. Therefore, a scenario where the growth rates of deposits and loans increase sharply should come, to avoid a scenario like the bubble in 1998 and 2000, which led to very bad aftermaths. Many people are worried about this. In the U.S. as well, there is a significant amount of loans tied to loans. So, providing loans to the private sector, various hedge funds, and various funds are involved in this business.

I hear that jumping in now is making a lot of profit, so if we calculate the percentage in that part, it's about 99.1% compared to the total deposits. In terms of GDP, it's around 5.7%. So, this may feel really significant. However, it is still far from the level of the 2008 subprime crisis. The size of private debt is about 1.6 trillion dollars, even when added to this and calculated with loans, it still seems a bit distant from the crisis status of 2008. Nevertheless, it seems to be at a higher level than the peak level when the corona broke out. Of course, there was private credit at that time too, so when that was added in the calculation, it seems that the number was still lower. Anyway, at the current moment, uh

We will continue to monitor the situation, and when we compared the total credit to the overall sound level and GDP, it doesn't seem like a timing with such a tremendous risk. If it rises at this pace, well, if it goes up quickly, I think it may reach a worrisome level in about 2 or 3 years ahead. At this current point in time, regardless of the expected rate or even if we put in private credit or look at it as a percentage of GDP, we probably need to worry slowly. Therefore, I think it's a time when we need to worry slowly and continue to pay attention to this area and make judgments. Until then, anyway, we are gradually moving forward with a scenario of slow increase. So, by lowering the interest rates very quickly and providing abundant liquidity, the Fed is moving in that direction.

It doesn't seem like it will be connected. Just because Europe lowered interest rates, it doesn't mean the U.S. will quickly lower interest rates. I have some doubts about that part. So, what we need to keep an eye on is how the market will rise in the future. It seems important how the market will rise. In that regard, what we hope for is a market that slowly and steadily rises. A market that surges rapidly and then plummets is really difficult to respond to, and individual investors are more likely to incur losses than to make investment profits. So what we hope for is a market that steadily rises. Currently, by looking at various indicators, if the Federal Reserve does not drastically lower interest rates, it seems that the market will continue to rise steadily. Also, if the interest rates are lowered very slowly, then.

I think we need to go with the scenario to achieve the desired outcome. However, fortunately, it seems like the Federal Reserve is doing very well right now, and we believe that the banks are also performing very well. If we become too greedy and greedy, it could lead to sharp rises and falls, but it is really fortunate that it is not the case. Where can we see this? Currently, we look at the BIS ratio of the U.S. banking sector, which shows how much money is being used recklessly. Yes, if we look at that, the Tier 1 capital ratio is still at 13.8%, which is a high number. When the financial crisis happened in the past, this number dropped to around 8%, so it is still a high number now. But the important part

It's not just lending money based on those numbers, so it's really fortunate that it's not breaking completely and it's holding up well. This is because the Tier 1 capital adequacy ratio of the banking sector compared to total assets is currently at around 8.5%, which is not a high number. In the past, in 2010, it dropped to about 8.3%, and even in the very old days, it dropped to around 6%. Therefore, we believe that the economy will move in a very stable manner, rather than showing signs of overheating. In this context, if you look at the ratio of a company's net assets to disposable income, it is still a very high number, almost at 776, nearly 777%. This shows that the company is solid, which allows for a very stable growth. Additionally, the company is very smart.

I am currently consuming, and in the midst of this, we can see that wages are also rising appropriately, so it can be said that there is no overheating or need to worry about a severe downturn. Some people say that the job market is doing very well. If you look at the newly released employment figures from Friday, the expected number was 185,000, but it turned out to be 272,000, which is a big deal. Consequently, interest rates surged. The 10-year Treasury yield, however, in my opinion, may have been a bit exaggerated. Of course, it came out much higher than expected, but if you look at the combined numbers for March and April, the actual number is 15,000 lower than the announced number. So, what we are discussing now is that there were 275,000 new jobs.

Coming out, the number was much higher than 185,000 people, but you can also think that this number might fall as a manipulated figure. If you look at other indicators now, for example, the labor participation rate has actually dropped. Even when calculated by the wage growth rate, the number is in the early 4% range compared to the same period last year. So, looking at various numbers, it doesn't seem to be overheating. On the other hand, it's not at a level of too much stagnation either. Therefore, amidst stable wage growth and a stable job market continuing, the unemployment rate came out a bit higher than expected at 3.9%, not 4%. So, when judging these various aspects, in our opinion, the current job market seems to be overheating significantly, stimulating market bubble inflation, and the Federal Reserve may not lower interest rates under such a scenario.

It doesn't seem like it's going up, and the possibility of a scenario where rates go up is almost nonexistent. It seems to be heading towards a scenario where rates can be gradually lowered. So, many people are worried about the recent sharp increase in rates, thinking it's really tough. We believe that the rate of about 4.5% will slowly drop to the mid-4% range by the end of the year. And when we move on to next year, if it falls to 3.5%, it will drop significantly. It seems like it will continue to go down to the 4% to 3.5% era. So, in this environment, the attractiveness of the stock market is not skyrocketing, and if the interest rates drop significantly, it will not skyrocket either. Therefore, it seems that in this kind of environment, the stock market will continue to be in an environment where it can rise by more than 15% annually based on the S&P 500.

Such a possibility that can continue, that is a very important point at the current moment. Therefore, when looking at various indicators, the likelihood of going to Goldilocks is gradually expanding. This means that a scenario where we feel much more comfortable investing in stocks is being created. So, the point we are not discussing now is, the overall cycle, right? So, whether this cycle started as an AI cycle, or an economic cycle improving, or gradually slowing down, regardless of how it was formed, looking at the current timing in a very long cycle perspective, it is in the early to mid-stage. So, there is still a lot of time until we pass the second half, which is important. Looking at the Russell 2000 from that point of view, why did the Russell 2000...

You can now see that it is a negative rate of return compared to the beginning of the year. I think that the performance of small and medium-sized stocks will not be good until interest rates continue to decline. That's because in the economy, it will take a long time for this to spread to all areas and lead to significant overheating. So, for small and medium-sized stocks, typically, the performance starts to improve after interest rates are lowered. Therefore, in the current situation where it is still uncertain whether we will lower the rates in July, September, or November, it is not a scenario to buy small and medium-sized stocks right now. Anyway, the possibility of a recession in the current economy has become very low. In our assessment, the probability of an economic recession occurring within the next 2 years is actually very low.

I don't think it's only 5%, but I think it's around 30% on average now. Nevertheless, the probability has dropped significantly. In this context, when we look into where we should focus our investments now, there are growth stocks like Russell 1000, including large and mid-cap stocks, from 1st to 2nd place in terms of growth stocks like the ETF IWF. So, it's important to pay attention to this area. It's not the time yet to be interested in Russell 2000 value or Russell 1000 value. I think we should look into that later when we have completely entered the late-cycle, focusing on value stocks and conservative investment strategies. So, I think we should look into it then. Therefore, until now, we are in the first half, not yet reaching the second half.

It's not that we didn't make a profit. It's a time when we need to make good profits while playing the game in the first half. So, in times like this, we still maintain a high proportion of stocks, which is commonly referred to as an 80-20 strategy, with 80% in stocks and 20% in bonds. Amidst this, it is expected that the current inflation will gradually decrease and stabilize. Along with this, the S&P 500, which is currently at a high level, is expected to further expand, doubling or even reaching 23 to 24 times as the interest rates stabilize. Although the interest rates temporarily spiked, reaching 4.2 to 4.3 and then dropping back down, currently rising above 4.4, the overall direction is expected to continue to decline slowly. This is much better for the market, making investing much more comfortable and reassuring.

If we reevaluate the fair value of the S&P 500, considering that the current interest rate is at 4.5%, the appropriate value would be around 5,500 points. By the end of this year, if it drops to 4%, it would exceed 5,800 points. Then, looking into next year, if we calculate it at 4%, it would be around 6,800 points, and if it drops to 3.5%, it would reach around 7,300 points by the end of next year. Therefore, starting from now, with a modest growth rate of around 3%, looking towards the end of next year, the maximum increase could be over 35%. So, at the current situation, it is not about predicting a sudden 20% surge, but it is crucial to make selective and focused investments at the right timing. Even at this timing, growth stocks are still the top choice.

Let's focus on the Russell 1000 IWF up to the top spot. If we were to focus more, we could focus on Mega 7 Plus Alpha or Nasdaq 100. The strategy of focusing on these areas seems to be the best timing right now. I think I can say that. Now, let's talk a bit about the sector-related aspect. Within this sector, there are stocks that are experiencing changes. Many people are worried about what to do because many stocks that used to rise a lot are now falling continuously. Nevertheless, what's important is that at the current moment, we need to continue investing in industries connected to AI. I keep talking about investing mainly in growth stocks, about 85% of the investment should be in growth stocks, with over 60% in AI-related areas, and I keep mentioning this.

That's what I'm saying. In this process, when the timing comes for interest rates to go down, at that time, the stock prices of electric vehicles, electric vehicle parts, and bio-renewable energy can also rise. So, it is indeed essential to select good stocks related to that and prepare in advance. Therefore, in terms of portfolio composition right now, it is necessary to invest in growth-oriented areas. The speed at which productivity is increasing is much faster than during the internet era. So, with this high level of productivity improvement schedule coming out, in our judgment, we should continue to discover stocks related to the AI cycle, connected to the IT industry, and various hardware and software areas. Therefore, we will keep looking into it, and honestly, in our opinion,

The appeal of the Nasdaq 100, even if it cannot match the charm of the Nasdaq, is that it has almost increased by 30% compared to the current index, which means it could rise by almost 90%. Such an environment could continue for the next 1, 2, or 3 years. If the Nasdaq rises significantly, it is possible that it could surpass 30,000 points within the next 3 years. Therefore, we still need to focus on the most representative stocks within large-cap tech stocks, such as Nvidia, Tesla, AMD, Broadcom, Microsoft, Alphabet, Google, and so on. It is important to continue showing interest in this area. Individually, focusing on high-concentration stocks while making choices and concentrating is crucial. Eventually, the timing to sell everything will be when the concentration spreads to all S&P 500 stocks. So, when all stocks rise, it will be time to exit. However, at the current moment, we are still...

It seems far away, so when you consider the time it takes, it could be seen as short, like a year and a half, or long, up to three and a half years. During that period, the potential for NASDAQ to rise further, from our perspective, could be around 30% to even 90%. Therefore, in this kind of environment, we suggest that you continue to select stocks, or alternatively, simply invest in the NASDAQ index. If you delve into the stocks that are currently considered the most attractive globally, you will see that many are related to AI technology. So, even though some stocks may be falling recently and causing concerns, if the fundamentals are solid and you see them as attractive in the investment letters we provide, it might be better to hold onto them rather than sell.

I think the strategy is not good. Currently, most of the items are related to IT. Furthermore, renewable energy, electric vehicles, and bio sectors are emerging. It is mentioned that even renewable energy is included. So, we keep talking about the part where renewable energy is included. Therefore, anyway, at this point in time, we should not switch from growth stocks to value stocks. It is still necessary to invest in growth stocks and choose defensive stocks. For example, investing in utilities or saying that a considerable amount of funds have recently flowed into utilities.

Let me say that it is too early to increase utilities and invest in conservative stocks. We believe that the attractiveness is still very low. Therefore, at this current point in time, we emphasize once again that it is right to focus on growth stock investments. You might be confused by the timing now, and you may worry that we have invested too late, but we do not think it is too late. We still encourage you to have an interest in investing in the U.S., especially in growth stocks, and consider investing in dollars. It is a really good timing in terms of creating long-term wealth. We hope that you will continue to make global investments with us.

I sincerely hope that you have been watching for a long time today. Thank you. Hello, I'm Yoo Dong-won, the head of Global Asset Allocation at Yuanta Securities. I believe that many investors are looking for various investment opportunities in the current global market situation. Our department is currently operating three series of global asset allocation wraps using algorithms. Firstly, Yoo Dong-won's Global Asset Allocation Wrap is a product that seeks to generate low volatility returns through diversified investments in various asset classes calculated through algorithms. Secondly, Yoo Dong-won's Global Home Run Wrap is a product that focuses on small-scale assets and pursues aggressive profit generation using tactical asset allocation strategies. Thirdly, Yoo Dong-won's Global Anta Wrap invests 50% of assets in low-volatility assets such as bonds and gold, utilizing a strategic asset allocation strategy to diversify risks inherent in each asset class.

It is a product that generates variable income. If you would like to learn more about our product, please contact us through the methods below, and we will respond promptly. For those who are looking for investment destinations that can adapt to rapidly changing global financial markets, please contact our headquarters. Thank you.

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