Now, let's move on to the second topic for today. There may be quite a few people who have been waiting for this. The U.S. stock market is a key indicator of the U.S. financial market and serves as a gauge for global stock and financial markets, so we approached this topic with a focus on the U.S. stock market. I have been discussing the turning point, which refers to the period from September, specifically the week around September 20. At that time, it seems certain that the Federal Reserve will lower interest rates. The question is by how much: will it be a 0.25% cut or a 0.5% cut? There are various opinions on this, but we are generally expecting a rate cut to happen. When interest rates decrease, it means that more money will be injected into the economy, right? This implies that more money will be circulating in the market.

If more money is injected into the economy, wouldn't that positively impact the stock market? That's what many people are thinking. However, if you look at the stock prices, you'll see that they peaked on July 10 and have not really recovered since then. This is a situation being observed globally, including in Korea, which has been particularly affected. The market is showing a sluggish performance. Interest rate cuts are almost a foregone conclusion, so why isn't the stock market heating up? 

In the last broadcast, I discussed the concept of carry trade as a way to explain this. Today, let's examine easy money. What does easy money mean? It essentially refers to the idea that the cost of money has become cheaper, as interest rates are at extremely low levels.

We are in an era of ultra-low interest rates. After the financial crisis, we entered a zero interest rate environment, and quantitative easing was implemented. Then, starting from the end of 2011, interest rates were raised a bit, reaching about 2.5%, but in 2018, they were lowered again. Then the pandemic hit, and during the COVID-19 pandemic, interest rates were cut once more, and quantitative easing was resumed. So, in fact, since the financial crisis, for over the past 10 to 15 years, we have been in what is commonly referred to as the easy money period. It is important for us to pay attention to this easy money period because if interest rates are lowered again, there may be expectations that we will return to an easy money era. Such expectations do exist. Among the easy money periods, until 2009, we were dealing with economic recession, but starting from 2010, we observed a continuous trend.

When will it be? At the end of 2019, before the pandemic broke out, and then at the end of last year. The reason we aren't doing it this year is that in the second quarter, many corporate earnings reports have not yet been announced, so we cannot unify the data. Therefore, we have based it on the end of last year. If we look at the stock prices, we see the Dow Jones, S&P 500, and Nasdaq, which are the three major indicators in the United States. These three indicators represent absolute figures, meaning they show the stock price indices. Then there is the Nasdaq 100. I introduced the Nasdaq 100 previously. I pay particular attention to the Nasdaq 100, especially during the easy money period, as that is where the most money flowed. The Nasdaq 100 consists of the most reputable companies among those listed on the Nasdaq, which are well-known high-tech companies.

Alternatively, we can also consider energy companies. Recently, we have been connecting technology with energy sectors. This includes various fields, excluding financial companies. Additionally, I introduced the stock prices of Nasdaq companies. Since these are absolute figures, the differences may not be very noticeable. I am providing you with this numerical information. I calculated the operating profits of Nasdaq companies. It was a very tedious task, but I did it for you. The operating profits of Nasdaq companies from 2010 to 2013 represent the money earned over that one year. Operating profit is a key indicator of profitability, showing how much revenue the top 100 Nasdaq companies generated.

It was about 18.9 billion dollars. Yes, 18.9 billion dollars. But that was back in 2010. Now, how much did it increase by 2019? It increased to nearly 4 trillion dollars. That's an enormous increase, right? From less than 200 billion dollars to about 4 trillion dollars—how many times is that? Yes, over 20 times, right? It's an incredible increase. This happened over about 10 years. However, then, about four years later, during the COVID-19 pandemic in 2020, 2021, 2022, and 2023, how much did it increase? It surpassed 7 trillion dollars. By the end of last year, the Nasdaq companies generated about 7 trillion and 800 billion dollars in operating profit over the course of the year.

So, what do you think? It's been about four years, and it has doubled, right? This is an incredible amount of money. The revenue of Nasdaq companies has significantly increased. Revenue mainly shows how much a company is growing, right? If we look at the growth indicators, at the end of 2011, it was about 8,670 dollars. By the end of 2019, it had risen to 23.459 trillion dollars, and by the end of 2023, it reached 37.935 trillion dollars. This reflects the U.S. GDP, which has steadily increased to 15 trillion, 21 trillion, and 27 trillion dollars. 

Regarding the money supply, which indicates how much money has been circulated, at the end of 2010, it was just under 9 trillion dollars. By the end of 2019, it had grown to 15 trillion dollars, and by the end of 2023, it had increased to about 21 trillion dollars. The money supply has expanded. Next, I looked at the rate of change. When I examined the rate of change, the Nasdaq stock price return after the financial crisis...

Over the past 10 years, there has been an increase of about 2.5 times, which translates to an average annual growth rate of 10.5%. During the pandemic period, which lasted 4 years, there was a decrease of 1.2 times, resulting in an annual decline of 3.8%. If we look at the S&P 500, it increased 2.6 times over the past 10 years, with an average annual growth rate of slightly over 11.1%. During the pandemic, it increased by 1.5 times, with an annual growth rate of just over 10%. This means that the S&P 500, which mainly consists of large corporations, has a higher return rate. 

If we examine the Nasdaq, the growth is even higher. Over the past 10 years, it increased by 3.4 times, with an annual growth rate of about 15%. During the pandemic, it increased by 1.7 times, with an annual growth rate of approximately 14%. Particularly for the Nasdaq 100 companies, the stock price return is the highest at 3.9 times, surpassing both the Dow and the overall S&P 500 as well as the entire Nasdaq.

It's high, right? An annual rate of 16.4%. And even during the pandemic, it remains the highest at around 1.9 times, close to 18%. This means that if you invested in Nasdaq companies, you would have earned the most money on average. To put it simply, I calculated the operating profit margins and growth rates of Nasdaq companies separately. It's interesting because we can see changes now. Over the past ten years, the operating profit margin of the Nasdaq 100 increased by 88.7% annually, and the growth rate increased by 11.7% annually. On the other hand, during the pandemic, it nearly doubled, with an annual increase of 16%. However, there wasn't a significant difference in growth rates; they increased by about 1 percentage point more during the pandemic compared to the previous ten years, but there isn't a big difference compared to the earlier operating profits.

So, the gap widened by about double, and yes, there was a lot of profit. We made a lot of money, but companies that generated more profit than growth were quite numerous during this period, which was the pandemic. The GDP was, well, during this period, the GDP was higher. This means that inflation was high, so this is nominal growth, nominal GDP. However, if we look at the increase in the money supply, we see that before the pandemic, it increased by 6.4% annually, while during the pandemic, it increased by 7.9%. This indicates that more money was circulated. As we know, through this, what can we do? Stock prices, as we know, rise, right? Stock prices fundamentally reflect the value of companies, meaning they are evaluated in the market by investors.

Then, companies fundamentally need to make a lot of money. They need to earn a lot to distribute significant amounts to investors, allowing investors to make profits as well. Right? Therefore, profitability indicators are important; making a lot of money is crucial. In this context, the operating profit margin is a representative profitability indicator, so the operating profit margin is very important. When we actually look at it, if we examine the Nasdaq's stock price return and operating profit margin, we see that the operating profit margin significantly increased during the pandemic. However, the stock price return did not rise much compared to the previous decade before the pandemic. During the pandemic, the operating profit margin was 16.4% and during the pandemic period, it was 17.8%. Right? The operating profit should have almost doubled, but...

주가를 결정하는 요인이 수익성만 결정하는 것은 아닙니다. 수익성만이 전부는 아니고, 기업의 성장성도 중요한 요소입니다. 우리는 이러한 성장성을 반영할 것이고, 또한 유동성, 즉 돈이 얼마나 시중에 많이 풀렸는지를 고려해야 합니다. 이는 통화량 증가율로 측정할 수 있습니다. 통화량 증가율은 팬데믹 동안 높았죠. 그래서 제가 이 데이터를 분리해봤습니다. 나스닥 백의 수익률을 예로 들면, 파란색 막대기는 금융위기 이후 10년을 나타내고, 오렌지색 막대기는 팬데믹 이후 4년 동안의 수익률을 보여줍니다. 이 데이터를 보면 어떤 차이가 보이는지 알 수 있습니다. 영업 이익률은 월등하게, 약 두 배 정도 차이가 나죠.

If you look at the second bar graph, it shows 8.7 and 15.6. The others are similar, but the pandemic period is higher. Overall, everything is elevated, but the operating profit has almost doubled. This indicates that the operating profit margin played a leading role in profitability. So, during the pandemic period, it had a significant impact on determining stock prices. The stock return, then, what do you think determined it before that, prior to the financial period? It was relatively low. What do you think could have caused that? It was the money supply. The money supply increased by about 11.7%, which significantly contributed to profitability. The increase in the money supply helped to boost stock prices. Now, let's break down this contribution a bit more.

I analyzed it in detail: the increase in money supply, the NASDAQ price-to-earnings ratio, and the NASDAQ operating profit ratio. I also looked at the variance. The variance refers to the difference between the stock price and the operating profit, which has remained around 1.8 times. After the financial crisis, for about ten years, this difference was approximately 1.8 times. So, during this second financial phase, what does this 1.8 times indicate? If we apply this to the money supply and liquidity and calculate it, we find that the money supply contributed over 100%. It's not just about money; there are factors like growth leadership as well. In other words, the substantial increase in money supply significantly contributed to the rise in stock prices after the financial crisis over the past ten years. But take a look at the pandemic period. During the pandemic, it is often said that...

When we look at the differences between stock price, stock return multiples, and operating profitability, there is a difference of only 0.14. That is 0.14 out of 100. However, the money supply increased significantly during that time; it increased by about 1.4 times over four years, while it had increased by 1.7 times over the past ten years. This means that the money supply increased even more during the pandemic period. Over four years, the money supply increased by 1.4 times, which means that liquidity was around 10% for stock prices. When a lot of money is injected into the economy, it has a significant effect, influenced by financial conditions and the pandemic. During the pandemic period, companies generated a lot of profits, which contributed to raising stock prices.

What I'm focusing on when it comes to stock prices is what everyone is curious about: the future. People are expecting a rate cut, and there is a hope for the arrival of an easy money era. However, I believe that a return to an easy money era like in the past is difficult. Nonetheless, many people in the financial market are anticipating that the stock market will rise again due to the arrival of an easy money era, which is expected from the rate cuts. 

However, during the period after the pandemic, the main factor determining stock prices has been corporate profitability, not liquidity. So, what are the representative symbolic companies that lead corporate profitability? Recently, we have been observing trends from 2020 to 2023, especially over the past year and almost two years.

What has driven the stock price? It's the new ecosystem led by AI. NVIDIA is almost a symbolic company in this regard, and their growth potential is a crucial variable moving forward. Recently, despite NVIDIA reporting very good results for the second quarter, the stock hasn't performed well and has even fallen. This has led to a lot of analysis in the market. If we compare NVIDIA's performance over the past year, the answer becomes clear. NVIDIA has an unusual fiscal year; for this year, the second quarter runs from May to July. So, according to their standards, the first quarter is from February to April, but they refer to this as the second quarter of 2025.

They have set their fiscal year, so that's fine. However, for us, from May to July 2024, this was announced last week, right? They announced that sales increased by 122%. That's a significant increase. Operating profit also rose by 174%. But the stock price fell. Why is that? If you look at the previous periods, from the second quarter of 2024 to the first year of 2025, sales were all over 100%. If you look at the recent three quarters, it was over 200%. Compared to this, the second quarter of this year looks modest. Look at the operating profit. The operating profit was over 1,000% at times. Operating profit is really important because it shows how much money they made. So, 174% is quite extraordinary compared to that.

If we look at the net profit, it's the same. The second quarter of this year didn't earn less money; in fact, it earned a lot. However, compared to the last year, it's quite meager. So what this means is that Nvidia, especially since the emergence of ChatGPT, has experienced another boom. The Nvidia we saw during that time, reflecting the past year, indicates that this trend will continue. Currently, there are expectations for the release of the Black AI accelerator by the end of this year, and it's anticipated that this will lead to further growth. So, if we consider the first quarter compared to last year's fourth quarter...

In the third quarter, there were expectations that things would continue as they had been. The market's expectations were very high, and this was reflected in stock prices. There was an anticipation that these results would continue for the time being. For instance, it was said that the product would be launched at the end of the year. However, there were issues, and TSMC mentioned that it might be possible in early next year. When the stock prices fell this time, they decided to buy back $50 billion of their own shares to stabilize the situation. They also stated that the fourth quarter would proceed as planned, but despite this, the market still has doubts. There are concerns about whether they can continue to meet the growth patterns observed over the past year. This is the background of the situation.

In the background, we can see that if we look at NVIDIA's stock trend, it peaked on July 10th last month. After reaching that peak on July 10th, it experienced a shock during Black Monday, but it somewhat recovered. However, it has still been sluggish for about the past two months, and it hasn't fully recovered yet. Although NVIDIA's stock has been growing steadily, when did it really start to jump? It began to take off after January of last year. When exactly was that? The major event was when ChatGPT debuted at the end of November 2022. I believe Reuters has best captured NVIDIA's recent situation.

In thinking about it, what I said was that NVIDIA fails to impress. What does that mean? Growth is still there; hungry investors are seeking more growth. Over the past year, they have been longing for the same kind of growth that occurred previously. So, there was a clash, but it failed. Yes, because it failed, NVIDIA is currently showing this situation. This is what happened over the past year, especially after the advent of ChatGPT, where artificial intelligence has become applicable and commercialized across the entire industry. As these optimistic prospects spread, NVIDIA, which is leading the so-called AI semiconductor market, has surged with great momentum.

Isn't it true that as the AI-driven new ecosystem unfolds, it represents yet another technological revolution? This revolution can be applied across all fields. Over the past year, there has been a significant vertical increase in revenue. However, recently, it seems that various factors are affecting the growth rate of sales and operating income, which has not been very promising. When we look at this, we must consider that stock prices reflect future expectations. After the pandemic, stock prices are fundamentally driven by corporate performance. So, who is leading corporate performance? It's artificial intelligence and its related sectors that are at the center of this shift.

Then, regarding this part, there is still significant demand for creating what we call an industrial ecosystem in the future. However, from the perspective of companies making purchases, particularly big high-tech companies, capital expenditure must yield returns. If they believe that returns will not materialize, investments will inevitably slow down. This issue remains a challenge we need to address. We should not become overly fixated on liquidity. Therefore, some people are saying that if there is a larger-than-expected rate cut of 0.5 percentage points in September, it could negatively affect the stock market. The notion of a significant rate cut raises concerns.

What it means is that there is a lack of confidence in the economy. If we were to lower interest rates now, it would be due to employment concerns, right? The employment indicators have shown that the growth rate for the second quarter has been slightly revised, but if we were to lower rates, it would ultimately be because of employment issues. This is due to concerns about a recession, which is reflected in the interest rates. The question is whether this will actually help the stock market significantly. Last week, I mentioned that if the U.S. economy fails to achieve a soft landing, it could lead to a massive surge in the carry trade. The term failure implies a significant drop in interest rates, which could actually be more of a burden for the stock market rather than a benefit. This discussion stems from that point. Ultimately, what can save the U.S. stock market and the U.S. economy is...

AI leadership, in other words, the new industrial ecosystem must be confirmed. Until it is confirmed, we are dealing with a market full of uncertainties. Investors in stocks should pay attention to this uncertainty. Ultimately, I hope you do not focus too much on liquidity. This is the thought process behind this broadcast. I believe many people are anticipating a significant interest rate cut in September, which is why I took the lead on this topic.

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