Global investment bank JP Morgan dismissed the summer stock market correction narrative that spread amid geopolitical risk and interest rate volatility and turned to a "bullish" view. Aimed at investors who recently joined the sell-off in semiconductors and big tech, it advised using the price drop as a buying opportunity, saying, "Selling now is like falling for a trick."
JP Morgan's global markets strategy team, in a report on the 1st (local time), presented an aggressive investment strategy to "increase and maintain equity exposure through year-end." The move contrasts with its cautious stance just a day earlier, on Aug. 31 (local time), when it said the market could worsen in the short term due to renewed U.S. Government Bonds yield gains, geopolitical tensions such as clashes with Iran, and weakening artificial intelligence (AI) momentum.
JP Morgan assessed that the stock decline driven by geopolitical risk will be a short-term phenomenon lasting days to weeks, not by the quarter. Strategist Matejka noted, "Signs of cash being pulled from the market and oversold signals are already appearing," and said, "Joining the selling line in a downturn, swayed by headline volatility, is the riskiest strategy."
The key reason JP Morgan expects the Standard & Poor's (S&P) 500 and global stock markets to set new records by year-end is the healthy breadth of earnings per share (EPS). Downward revisions to global corporations' results have run their course, the ratio of upward revisions has returned to positive territory, and the eurozone purchasing managers' index (PMI) has rebounded for three straight months, signaling underlying global growth momentum remains intact.
It also analyzed that the recent rise in U.S. Government Bonds yields is a "normalization" reflecting an economic recovery, not a resurgence of inflation, and that as signals of a turn to a weaker dollar become clearer, a foundation has been laid for emerging market (EM) stocks to strengthen.
It also reversed its earlier caution on tech and memory semiconductor sectors directly tied to the domestic market (KOSPI). JP Morgan said key technical indicators for semiconductors (SOX index) and the Korea market have entered oversold territory and noted, "The AI overheating cooldown and momentum-driven sell-off are effectively complete." It picked semiconductors, beneficiaries of rising hyperscaler capital expenditure, as top picks. Among emerging markets, it recommended buying countries with a large share of the IT value chain, including Korea, China, and Taiwan.
As global investment banks advance a bullish case, domestic market experts also said that after a short correction from external variables, attention should turn to key indicators and fundamentals.
Lee Sang-jun, a researcher at NH Investment & Securities, said, "With the resumption of fighting between the United States and Iran pushing WTI (West Texas Intermediate) to the $90 level and the U.S. 10-year Government Bonds yield surging to 4.8%, external negatives have increased volatility in the domestic market," adding, "If the U.S. Government Bonds yield threatens the 5% level, concerns over fiscal soundness could increase correction pressure, but if it exceeds 5%, rates will find stability through direct U.S. government intervention (such as long-bond buybacks) and confirmation of softening jobs and inflation data."
Lee added that attention should be paid to the solid fundamentals, such as Korea's August semiconductor export growth and global AI infrastructure demand.
Lee Sang-heon, a researcher at iM Securities, diagnosed the recent market decline as a "climax" phase where short-term fear peaked and predicted a rebound phase will begin soon. As the U.S. 10-year Government Bonds yield fell from 4.82% to 4.78% on the 2nd (local time), prompting a rebound led by Russell small- and mid-caps, a recovery in the domestic market is also seen as not far off.
Researcher Lee said, "Expectations of inflation spurred by rising oil and the surge in the U.S. 10-year Government Bonds yield spread fear across the market," but analyzed, "If measures to cap long-term rates, such as the U.S. Treasury's Government Bonds buybacks (purchasing its own bonds), kick in in earnest and the rise in oil prices enters a lull, rates will naturally find stability."
Securities industry experts projected that in September-October this year, the domestic market is more likely to see a differentiated, stock-by-stock landscape than an across-the-board surge in the indexes.
Choi Jae-won, a researcher at Kiwoom Securities, also said, "Higher U.S. Government Bonds yields are expanding discount pressure centered on growth stocks," adding, "A long-term view of the AI value chain remains valid, but in a phase of heightened short-term rate caution, risk management should focus on value stocks with relatively low rate sensitivity (duration) and high earnings stability."