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U.S. Stock Market Volatility and Caution in Chinese Stock Market: Investment Strategies and Economic Analysis

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1. Causes of U.S. Stock Market Volatility and Investment Direction

1-1. Major Causes of Volatility

• The U.S. stock market has recently shown continuous volatility.
• Major Causes:
  1. Deep Sick: Internal uncertainties in the U.S. economy and concerns over declining corporate performance.
  2. Tariff Policies: Changes in tariff rates on Canada, Mexico, and China.
  • Example: Plans to impose tariffs of 255% on Canadian imports, 25% on Mexican imports, and 10% on Chinese imports.

1-2. Economic Impact of Tariffs

• Tariff increases effectively lead to two impacts: rising inflation and declining GDP growth.
  • Expected inflation increase: 0.8%~1%.
  • Expected GDP growth decrease: -0.8%~1%.

2. U.S. Economic Outlook

2-1. Productivity Increase Effect

• The development of AI technology is expected to boost U.S. productivity, offsetting the negative effects of tariffs.
  • Example: GDP productivity is expected to increase by more than 2% annually due to AI utilization.

2-2. GDP Growth Rate Outlook

• Q1 2025 GDP growth rate forecast: 2.9%
• According to the forecast, corporate performance is likely to improve continuously as interest rates stabilize.

2-3. Interest Rates and the Stock Market

• Currently, the 10-year Treasury yield is being maintained stably, which is a positive sign for stock market growth.
  • If interest rates stabilize below 4%, the overall stock market has a high potential to rise to the 7,100~7,700 range by the end of the year.

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3. Chinese Stock Market Risks and Precautions

3-1. Problems of the Chinese Economy

• Excessive Debt: A sharp rise in China's foreign debt ratio along with the devaluation of the yuan.
• Worsening Corporate Performance: Continued large-scale deficits of state-owned and joint venture enterprises.

3-2. Deflation Risk

• The Chinese economy is facing deepening consumption slump and domestic demand contraction issues amid deflation risk.

3-3. Trade Dependency

• China's trade dependency on the U.S. is higher than expected, and continued tariff pressure could negatively impact the overall economy.

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4. Global and Regional Investment Portfolio Strategies

4-1. Preferred Investment Regions

• The U.S. and Japanese markets are still the most stable, and among emerging markets, Taiwan, Vietnam, and India are gaining attention.
  • Taiwan: Strong competitiveness in the semiconductor industry.
  • Vietnam: Relatively high potential to replace China's risks.
  • India: High economic growth rate and improved investment environment.

4-2. Investment Strategy Excluding China

• A exclusion strategy is appropriate regarding the Chinese stock market, and instead, favoring Vietnam in emerging markets is important.

4-3. Investment Strategy within the U.S.

• Focus on Growth Stocks: Focus on companies utilizing AI technology and companies with high revenue growth rates.
  • The AI industry will continue to grow in 2025 and play a leading role in the stock market.

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5. Mid-to-Long Term Outlook and Conclusion

• Overall, the U.S. is establishing a strategy to offset the negative effects of tariffs and promote stock market growth based on AI technology development.
• On the other hand, China is likely to face greater investment risks in the future due to trade pressure and structural economic vulnerabilities.
• It is ideal to adjust the global portfolio focusing on major countries such as U.S., Japan, Taiwan, India, and Vietnam.

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• The U.S. stock market is expected to continue to grow based on AI technology, despite tariff policies and economic uncertainties.
• China is experiencing increased investment risks due to deflation and debt issues.
• It is recommended to focus on the U.S., Japan, Taiwan, and Vietnam in the investment portfolio and exclude Chinese investments.

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[More…]

• Future Prospects of the U.S. Stock Market and AI Industry
  https://nextgeninsight.net/?s=AI

• Comparison of Emerging Market Investment Strategies in the Global Market
  https://nextgeninsight.net/?s=%EC%8B%A0%ED%9D%A5%EA%B5%AD

*YouTube Source: [유동원의 성공투자]

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