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1. Market Issues Occurring Every Weekend Recently

For the past three weeks, events causing increased volatility have occurred every weekend.
This week, former President Trump mentioned that he would be conducting mutual tariff negotiations and announce them between the 10th and 11th.
Surprisingly, the U.S. Consumer Price Index (CPI) is scheduled to be released on the 12th.
How will the stock market react after this week's tariff announcement and CPI release?

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2. China's Retaliatory Tariffs and Trump's Response

▶ China announced retaliatory tariffs, but there were no items significant enough to cause a major impact.
▶ Therefore, Trump may take this opportunity to raise tariffs further.
▶ Trump tends to showmanship while flexibly adjusting policies.
▶ He may take a hardline stance in a way that the market dislikes.

✔ Key Point
The market will experience significant volatility as Trump alternates between negotiations and retaliatory measures in the tariff decision-making process.

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3. Stock Market Reaction and Inflation Concerns

▶ In the announcement last Friday, the stock market slightly declined, but inflation expectations soared.
▶ Even before the CPI announcement, inflation expectations jumped from the low 2% range to around 4%.
▶ If consumers expect price increases, vendors will also raise prices accordingly.

✔ Key Point
Even if tariffs are not actually applied, the market will be sensitive due to inflation concerns.

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4. CPI Announcement and Inflation Sustainability

▶ The CPI has been rising for three consecutive months, with the September figure reaching 2.4%.
▶ This announcement is expected to show a rise to a maximum of 2.9%.
▶ Bloomberg Terminal also forecasts that the 3% level will be maintained.
▶ There are no signs that the U.S. CPI will ease anytime soon.

✔ Key Point
The market expects the CPI not to ease in the short term, and is paying attention to the possibility of interest rate hikes accordingly.

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5. Possibility and Impact of U.S. Interest Rate Hikes

▶ In the past, the Fed would raise interest rates to curb inflation.
▶ The White House and the Fed may have no choice but to discuss the possibility of interest rate hikes if inflation rises to 4%.
▶ However, if the U.S. implements interest rate hikes, the government's debt interest burden will significantly increase.
▶ Last year, the U.S. federal debt interest cost reached $1 trillion, and could increase to $1.7 trillion if current interest rates are maintained.

✔ Key Point
Trump's position is that interest rates should be lowered, but the Fed may raise interest rates due to the CPI increase.

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6. Possibility of Japan's Interest Rate Hike and Liquidation of 'Yen Carry Trade'

▶ Japan is currently the only country in the world raising interest rates.
▶ Japan's 10-year government bond yield has risen to 1.3%, and further interest rate hikes are expected to be necessary in the future.
▶ If interest rate hikes continue, the possibility of the 'Yen Carry Trade' being unwound increases.
▶ As overseas funds invested in Japan return to Japan, liquidity may be withdrawn from the U.S. stock market.

✔ Key Point
Japan's interest rate policy may have an impact on reducing liquidity in the U.S. stock market.

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7. Impact on the Korean Economy

▶ If Japan continues to raise interest rates, it will be difficult for the Bank of Korea to lower interest rates.
▶ If interest rates are lowered hastily, exchange rate volatility will increase, and foreign investment funds may flow out of the Korean market.
▶ Accordingly, it is difficult for the Korean economy to secure room for future interest rate cuts.

✔ Key Point
The interest rate policies of the U.S. and Japan can have a direct impact on the Korean economy.

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< Summary >

1. Trump's tariff announcement and CPI release schedule overlap, which is likely to dampen investor sentiment.
2. China's retaliatory tariffs may seem insignificant, but could trigger Trump's hardline response.
3. As CPI increase expectations approach 4%, discussions on interest rate hikes are expected to become active again.
4. If Japan continues to raise interest rates, a 'Yen Carry Trade' liquidation may occur, reducing liquidity in the U.S. market.
5. Changes in the interest rate policies of the U.S. and Japan will make it difficult for Korea to lower interest rates and will have a complex impact on the economy.
6. In the end, it is difficult for the market to stabilize in the short term, and investors need to be cautious.

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[More…]

1. Fed Interest Rate Policies and Stock Market Outlook
👉 https://nextgeninsight.net/?s=%EA%B8%88%EB%A6%AC

2. Japan’s Interest Rate Hike and Yen Carry Trade Liquidation
👉 https://nextgeninsight.net/?s=%EC%9D%BC%EB%B3%B8

*YouTube Source: [Jun’s economy lab]

– A crisis more severe than the tariff war is approaching.