This FOMC, "Windless Zone"

🚨 This FOMC, "Windless Zone" Forewarned? But Key Variables Overlooked By Markets!

The U.S. Federal Reserve will announce the contents of this month's FOMC meeting at 4:00 p.m. on Thursday, Japanese time.
The market already has a 100% "policy rate freeze" reflected. But will this really go by "without events"? 🤔

🔍 Key Points Summary

1️⃣ FOMC meeting: "Just go as it is"
•"Frozen confirmed": Markets are already confident the Fed will freeze policy rates.
•"Vote is also expected to be unanimous": likely to be frozen without internal disagreement.
•"Powell Press Conference (4:30)": Expectation of plain remarks, early response is difficult as Trump's economic policy is uncertain.

➡️ "The right thing to do is nothing." (by former Dallas Fed President Kaplan)
➡️ Conclusion: There are no variables in FOMC itself.

2️⃣ Interest rate market trend: 'Long-term and short-term interest rate difference Stepping'

📌 Recent changes
• 2-YEAR-10-YEAR RATE DIFFERENCE +33.5bps (Jan. 13 +47.7bps → latest slight dip)
•In July 2023 -110.8 bps (reversal), now significantly mitigated
•Long-term interest rates reflect inflation premium + government debt risk premium

📌 Investor movements
• Short-term bonds (less than two years) investment attractiveness ↓
•Preferred 3-5 year mid-term bonds ↑ (risk-reward balance)

➡️ Conclusion:
The current U.S. Treasury market "reflected expectations of a rate cut, but not sure about the pace."
The possibility of a flattening interest rate curve in the short term until Trump's policy is in full swing.

3️⃣ Foreign exchange market: "Dollar continues to strengthen? vs temporary adjustment?"

📌 Background of strong dollar
•The dollar continues to strengthen since October 2023
• Speculative long position (based on CFTC data) highest level since 2019

📌 However, the possibility of a dollar adjustment has also recently been suggested
•"Trump Policy Uncertainty" → Markets Lost Direction
•ECB, BOE, BOC, SNB → all dovish stances (likely to remain relatively strong in the dollar)
•Barclace "failed to rule out the possibility of a rate hike in 2024"
•BOA & BNP Paribas "may end Fed rate cut cycle"

➡️ Conclusion:
The dollar is unlikely to plunge, but the recent overbought long position is likely to adjust.

4️⃣ U.S. economy status: Why the Fed won't lower interest rates

📌 GDP growth rate
•3Q2023 +3.1% (compared to previous quarter)
•Q4 2023 Projections +3.2% (Market Outlook +2.7%)
• Neutral growth rate seen by the Fed: +1.8%

📌 Employment market & unemployment rate
•Maintaining 4.1% unemployment rate
• Average monthly increase of +180,000 nonfarm employment (as of 2023)
• 223,000 new unemployment claims → historically low

📌 Inflation & PCE (key gauge of Fed view)
•Core PCE +2.8%
•Fed target 2% vs realistic neutrality level 2.5% to 3%

➡️ Conclusion:
The U.S. economy is still strong, and inflation is not fully under control
"If interest rates fall now, there is a risk of overheating."

📉 Investment strategy (long/short signal)

🚀 LONG CHOONG (BUY SIGNAL)
• Expect strong U.S. bonds (especially 3-5 yr) → $IEF (iShares 7-10 yr Treasury ETF)
• Euro/yen buying possibility at dollar weak adjustment → $FXE (Euro ETF), $FXY (yen ETF)
• If interest rate hike expectations fall, Nasdaq tech stocks could rebound → $QQQ

📉 SHORT CHOOTING STRATEGY (SELL SIGNAL)
•If the Fed "maintains a hawkish stance," interest rate sensitive stocks (high dividend/litz) pressure → $VNQ (real estate ETF) short
• If the dollar continues to strengthen, commodity falls are likely → $GDX (gold ETF), $USO (oil ETF)

📌 Bottom line: "Markets underestimate Fed"

📍 This FOMC looks **"no variable"**, but while the Fed "freezes interest rates" it is **"likely to block expectations of a March cut"**.
📍 There is still a preference for medium-term products in the bond market, and expectations exist in the stock market that "the Fed will cut it," but there is also a possibility that Powell will be more hawkish than expected.
📍 There is a possibility of a strong dollar adjustment, but it is likely to strengthen again by the end of the year.

➡️ Short-term bond & volatility hedging strategy will be advantageous for investors!

📝 To say something more:

This FOMC is literally **"no wind zone"**?
The moment you think about it, the market may once again experience a **"Powell shock"**.
Markets follow the Fed, not the Fed.

📌 Summary:
•FOMC policy rate freeze confirmed, expected unanimously
•Fed likely to block expectations of a rate cut in March
•U.S. economy remains solid, inflation is also far from 2% target
•Dollar adjustment is possible in the short term, but mid- to long-term strength can be maintained
•Bond market favours medium-term (3-5 years), expectation of rate cuts likely to rebound technology stocks
•Long/short strategies can vary depending on the intensity of hawkish speech!

New positions disappear due to AI?
a stupid thing to say.

If so, new positions should have been eliminated by the era of office automation in the 1970s. At least during the information revolution of the 1980s.

There are many companies that can't even use Excel properly. AI? In order for AI to be used properly at the company level, it must be a company that succeeds in DT and can drive data. Most large companies also work in a way that the strategic planning office satisfies the CEO's confirmation bias, but AI...

AI will deepen the technological polarization among companies. Some companies will do it right, but most companies have no choice but to use AI as an aid for fast business processing, even though it is still inefficient. Why? It's because data has not been used properly in the first place.

It is right to understand the impact of AI compared to deskilling in the industrial revolution. The only thing experienced workers can put forward is skill, and the rapid development of technology makes the skills that experienced people have accumulated so far meaningless.

Think about it carefully. Let's see if Samsung Electronics will be a cheap newcomer in the AI era. Just write it down at lunch

##Here's a look at Samsung Electronics' performance in the fourth quarter

- It was KRW 75.8 trillion, a 12% increase from the previous year, but a 4% decrease from the previous quarter
- Gross profit of KRW 28.5 trillion, up 31.6% from the previous year, up 51.35 from the previous quarter
    - Gross profit margin of 37.6% compared to 31.9% in the same period last year
- R&D expenses amounted to KRW 10.3 trillion, up 36% and 37% from the previous year and the previous quarter, respectively
- Operating profit increased 130% year-on-year and 132% quarter-on-quarter to KRW 6.5 trillion
- Net profit rose 23% year-on-year and 23.8% quarter-on-quarter to KRW 7.8 trillion

- DS sales increased 38.8% year-on-year to KRW 30.1 trillion, an increase of 38.7% year-on-year
    - Operating profit of KRW 2.9 trillion, year-on-year turn surplus into surplus from the previous quarter
- Memory sales rose 46.4% year-on-year and 3.1% quarter-on-quarter to KRW 23 trillion    
    -

##I don't think it's going to collapse right away.
Objective figures, sales, and operating profit figures show that the semiconductor sector has turned weakly into a surplus and is growing. However, sales and operating profit of the MX division, which operates mobile phones, etc., fell more than expected.

Expectations for Samsung Electronics are high, and this performance can be very disappointing. However, it is not a bad thing to look at other companies as if they are analyzing other companies by putting down excessive expectations.

The world talks about Samsung Electronics as if it were going to collapse, but it's not a very busy company. In addition, it's not a company that looks like it's going to collapse right away.

##Excessive expectations are bound to be broken.

Samsung Electronics' stock price may not be able to rebound immediately, but there is no reason to be so bad in a long breath.

Excessive expectations are bound to be broken at any time. If the disappointment caused by excessive expectations was great, the time will surely come when they look pretty after the excessive expectations are resolved.

##Samsung Electronics is only making achievements that match Korea's level.

To be honest, it is abnormal to look at Korea and ask one company to achieve the same performance as a top U.S. company.
Currently, Samsung Electronics is taking actions to the level appropriate to Korea's national prestige. As Korea is changing its position, abnormal thinking that Samsung Electronics demands "flying" should be broken. Will Samsung kill him?
No, it's just a pity.

#Fed #FOMC #Rate Outlook #Dollar #LongChoong #ShortChoong