US Stock ETF: Risk & Opportunity

● Covered Calls – Capping Upside.

2024 US Stock Market Outlook and Global ETF Trends – Risks, Opportunities, and Changes in Strategy

Key Points Covered in This Article

– Recent recovery trends in the US stock market and valuation debates
– Major risks: earnings announcements, tariffs, interest rates, and macro environment
– Promising sectors and investment strategies for 2024
– Evolution of covered call ETFs/ETNs and investor responses
– Changes and implications in Asian financial markets such as Hong Kong and Singapore
– Recommendations for the US stock market and long-term investment strategies

1. Current Status of the US Stock Market and Major Risks

Looking at key indicators, the US stock market has rebounded rapidly after hitting a short-term low in early April due to Trump issues, and has now largely recovered.
The major risks are structured as follows:

Earnings Risk: The recent earnings surprise ratio is lower than the 5-year average. Analyst forecasts continue to be conservative, so there are many cases of earnings 'beats,' but there are few truly surprising performances. In the guidance of actual companies, the "tariff impact" is repeatedly mentioned.
Tariff and Political Uncertainty: US trade policy and tariff risks are mentioned in the guidance of almost all major corporations. Increased uncertainty in overall management plans → slowdown in investment and spending, with the possibility of performance pressure after the second quarter.
Impact of Interest Rates and Bond Market: The Fed's interest rate policy for this year is still being explored. The possibility of additional policy changes in June is low. Inflation uncertainty and a sharp rise in long-term interest rates for 10-year and 30-year bonds are creating downward pressure on the stock market. In particular, small and mid-sized companies are facing additional burdens as interest expenses increase.
Credit Rating and Fiscal Policy Risks: The US credit rating downgrade and strong tax cuts are also collectively increasing fiscal concerns → factors that put upward pressure on interest rates and weaken investment sentiment.

2. Promising Sectors and Investment Ideas for 2024

– Not all sectors can withstand tariff and earnings risks.
– IT and Technology Stocks with Pricing Power – Representative sectors with irreplacability and the ability to pass on price increases.
– MS, Apple, etc., with subscription-based and difficult-to-replace products, are expected to maintain a solid trend.
– For some companies like Apple, the expected tariff increase (expected up to 125%, actual 30%) has been lower than expected, creating a short-term ‘worst is over’ atmosphere.
– Consumer Goods/Retail (e.g., Walmart, Home Depot): Directly hit by tariffs, leading to reduced product range and 경영 pressure such as margin deterioration.
– Overall Consideration: There are still no other clear beneficiary sectors. The ability of each company to pass on tariff and cost increases will determine the future direction.

3. Latest Trends in Global ETFs/ETNs

– Expanding Access to Physical Markets: ETF-ization of private debt markets such as Tastes and Apollo private credit. Despite liquidity (redemption) issues due to the structure of the private market, attempts are being made to strengthen the flow of funds from institutions → consumers.
– ETF-ization of Structured Products: Products combining stocks + derivatives (covered calls, buffer types, loss-limited types, etc.) are being launched one after another.
– Rapidly reflecting investor needs from simple indexes → structured/thematic products
– Evolution of Covered Call ETFs:
– Korean investors continue to demand S&P 500 and NASDAQ covered calls (JEPI, JEPIQ, etc.).
– US: Adjusting the operating rate by selling options OTM, etc., instead of 100% option selling, Korea: Partial option selling (selling only 80~85% – partially securing market upward momentum).
– Expanding various thematic covered call ETFs such as Big Tech and AI baskets (e.g., FEPI, AI).
– Potential for annual cash dividends of 8~34% (receiving covered call premiums).
– Advantages: Certain returns and volatility mitigation / Disadvantages: Cannot chase additional profits during a rapid rise, and is partially exposed to stock price declines during a downturn.

4. Asian Financial Markets – Changes in Hong Kong and Singapore and the Battle for Hegemony

– Hong Kong: Real estate market has been weak for four years, and economic difficulties continue.
– Although a sharp increase in tourists is positive, its position as an Asian financial hub is being partially overtaken by Singapore.
– Major investment banks (Goldman, Citi, etc.) still maintain their base in Hong Kong.
– Singapore: Hedge funds, large capital, and family offices are accelerating their move from Hong Kong → Singapore.
– Hong Kong Dollar Peg (Exchange Rate Peg): The ‘dollar peg dismantling theory’ circulates regularly, but it is not taken seriously locally.
– From the perspective of Hong Kong and China, the dollar peg itself is the greatest competitive advantage → expected not to be changed recklessly.

5. Long-Term US Stock Market Investment Strategy Recommendations

– US Exceptionalism Debate: Liquidity and growth concentration phenomenon has continued for the past 10 years.
– (To the extent that a “25-year cyclical bull market” theory has been presented)
– Although there are tariff and political uncertainties, major exchanges such as the NASDAQ are scheduled to trade 24 hours a day.
– Continuous inflow of growing companies worldwide, concentration of liquidity → Investment centered on the US market is still considered valid.

6. Conclusion and Investor Advice

– Diversification and management of various risks (tariffs, interest rates, politics) is necessary.
– Consider an appropriate allocation to technology stocks with strong pricing power and fundamentals, and thematic ETFs (especially volatility-utilizing products such as covered calls).
– Need to actively monitor changes in Asian financial markets such as Hong Kong and Singapore.
– Continued expectation of a long-term upward trend (bull market) in the US market: Recommend maintaining a long-term investment strategy considering crisis response and innovation capabilities.

< Summary >
The US stock market is showing a rapid recovery after a short-term correction, with multiple risks and opportunities coexisting, including earnings, tariffs, and interest rates.
IT and other sectors with pricing power are expected to be strong, and structured ETF products such as covered calls are the trend.
The Asian financial hub is partially moving from Hong Kong to Singapore.
The flow of growth capital and innovation continuing to concentrate in the US market is valid in the long term.
Recommended to combine risk diversification, thematic ETF utilization, and technology stock concentration strategies.

2024 US Stock Market and ETF Outlook Key Summary

The US stock market is facing multiple risks at the same time, including earnings, tariffs, and interest rates.
Technology stocks with strong pricing power and structured ETFs such as covered call strategies are gaining attention as investment options.
Global capital continues to concentrate in the US stock market, and the phenomenon of Asian financial hubs moving from Hong Kong to Singapore should also be noted.
In the mid- to long-term, US market investment strategies are valid, and flexible portfolio construction and risk management are recommended in parallel.

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