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Financial Markets and Investment Strategies: Market Briefing on February 2, 2025

1. Recent Trends in Financial Markets

• Decline in Major U.S. Indices:

  • S&P 500: Down by 1%.
  • Nasdaq: Down by 1.6%.
  • Particularly, the fluctuation of large tech stocks has been a major influence.

• Increased Volatility:

  • Increased risk per stock amid changes that confuse market participants.
  • Key macro indicators and micro events are influencing the direction of the market.

• Upcoming Major Economic Events:

• U.S. Employment Data, PMI, and Consumer Sentiment Index announcements scheduled.

• Major corporate earnings announcements scheduled: Amazon, Alphabet, AMD, Disney, etc.

2. Macro Perspective: Positive Growth Outlook

• Interest Rates and Economic Cycles:

  • Macro risks are decreasing due to overall interest rate stabilization.
  • Reduced concerns of recession due to the resolution of the inversion of the short-term and long-term interest rate difference.

• GDP Growth Opportunities:

  • Potential for more positive economic growth rates starting from the first quarter of 2025.

• Impact of Inflation:

• Possible inflation increase of 0.3~0.5% due to potential tariff increases.

• However, this is not expected to significantly hinder growth rates, maintaining a positive outlook.

3. Specific Investment Strategies

• Investment Centered on Developed Countries:

  • Allocate 80% of investments to developed countries such as the U.S. and Japan.
  • Allocate an additional 20% to emerging markets (Vietnam, Taiwan, India, etc.).

• Focus on Tech Stocks and AI-Related Leaders:

  • Stocks related to semiconductors, data centers, cloud computing, and software.
  • Especially, Nasdaq-listed tech stocks and growth stocks are highly attractive.

• Small-Cap Stock Investment Strategy:

• Small-cap stocks may be attractive due to higher discounts, but limit the allocation to below 20% of the portfolio.

• How to Respond to Volatility:
  • Recommended strategy is to buy in installments during market corrections.
  • Use volatility to create long-term investment opportunities.

4. Key Elements: AI Cycle and Market Performance

• AI Innovation and Market Growth:

  • Similar to the internet revolution of the past (1997-2000s).
  • Potential for technology stock growth driven by AI over the next 1-2 years.

• S&P 500 Index Target:

  • Even if interest rates remain at 4.5%, the S&P 500 could reach between 7150-7400 points.

• Strategy for this Year:

• Manage volatility in the first half of the year and predict significant growth potential starting mid-year.

• Potential for a 18-22% increase by year-end.

5. Additional Considerations

• Tariff Issues and Growth Risks:

  • The extent to which increased tariffs will stimulate inflation is key.
  • Potential for tariff negative effects to not significantly impact growth rates.

• Difficulty in Stock Selection:

  • Possible increased difficulty in choosing AI-related stocks (e.g., Nvidia).
  • Therefore, it is necessary to pursue index-focused investments and stable investments centered on large tech stocks.

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< Summary >

• The recent U.S. stock market has become more volatile, and declines in large tech stocks have affected the overall market.
• Macro risks are somewhat decreasing, and there is a possibility of stable economic growth rates.
• Investment strategies recommend diversified investments centered on developed countries, particularly a portfolio focused on U.S. tech and growth stocks.
• It is essential to use a buy-in installment strategy to take advantage of volatility and participate in the AI technology growth cycle from a long-term perspective.

[More…]

1. Analysis and Outlook of S&P Index
2. Future of AI and Tech Stocks

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