S&P 500 continues to hit an All-time high, is a correction on the horizon? Pay attention to the trends of Trump's remarks | The Road to Becoming a US Stock Master by Heihachiro Okamoto | Moneyクリ MoneyX Securities Investment Information and Media for Financial Benefits

Concerns about economic recession temporarily recede, supporting investor sentiment

Last week (the week of June 30), the U.S. stock market updated major indices to all-time highs during the shortened trading session surrounding Independence Day, with the S&P 500 reaching 6279.35 points and the Nasdaq 100 reaching $22866.97.

The strong movements are backed by the robust gains in AI-related companies and the still resilient U.S. economy. In the June U.S. employment statistics, the non-farm payrolls increased by 147,000, exceeding market expectations, and the unemployment rate decreased to 4.1%. This temporarily alleviated "recession concerns" and supported investor sentiment.

On the other hand, the outlook for interest rates is showing somewhat complex reactions. The strength of employment has pushed back expectations for rate cuts, with the probability of a rate cut at the September FOMC (Federal Open Market Committee) plummeting from 93% to 67%. However, the current market seems to be interpreting this positively, suggesting that "the economy is strong, so the need for rate cuts is diminishing."

Tech-driven Nvidia [NVDA] hits all-time high, energy sector also performs well

Last week (the week of June 30), the best-performing sector was indeed technology. The S&P 500 Technology Index rose by +2.44%, with large-cap stocks like Apple [AAPL] increasing by 6.2%, Applied Materials [AMAT] in the semiconductor manufacturing sector rising by 4.28%, and KLA Corporation [KLAC] also up by 3.9%.

Although last week's stock price increase was 1%, NVIDIA [NVDA], which boasts the largest market capitalization in the world, reached a record high on July 3 and closed there. It is now only 2.9% away from a market capitalization of 4 trillion dollars.

Moreover, the energy sector is also performing well with a +2.09% increase, supported by the stability of crude oil prices and expectations for increased demand during the summer. On the other hand, the worst-performing sector was healthcare, with policy risks causing a 38.3% drop in shares of the major U.S. health insurer Centene [CNC].

U.S. Employment Statistics Results Dampen Rate Cut Expectations

The U.S. employment statistics for June, announced on July 3 (local time), showed that the number of non-farm payrolls increased by 147,000 compared to the previous month, significantly exceeding the forecast of 117,000. The unemployment rate also fell from the previous 4.2% to 4.1%, reaffirming the robustness of the labor market.

As a result, the possibility of a rate cut at the July FOMC has significantly receded, and the pricing in of a rate cut in September has sharply declined from 93.7% to 67.6%. Fed Chair Powell has repeatedly stated that it depends on the data, but last week at the ECB Forum held in the week of June 30, he received support from President Lagarde and others, lending a certain level of credibility to his cautious stance.

However, there are variations in the macroeconomy at our feet. The ISM Manufacturing Index showed positive results, but the components of new orders and employment were weak. Additionally, the ADP private employment report indicated a decrease of 33,000 jobs.

Additionally, the "tariff negotiations" that have resurfaced under the Trump administration have captured the market's attention. The United States has reached an agreement to reduce the tariff rate with Vietnam from 46% to 20%, but there is a possibility of an additional tariff of up to 40% on products that include Chinese components, posing a risk factor for importers of apparel and furniture.

Renewed tariff risks and the seasonality of the July market, the key lies in Trump's statements

U.S. President Trump stated, "Starting July 5, we will send a 'notice letter' detailing new tariff rates to countries where tariff negotiations do not progress." This document specifies the concrete tariff levels set to take effect from August 1, and it will first be sent to 10 to 12 countries, with expectations for the scope to expand further in the coming days.

Although it is not explicitly stated whether Japan is included as a primary target, reports from the BBC in the UK suggest a high possibility. The basis for this is,

1. There has been no notable progress in trade negotiations with Japan (especially regarding automobiles and agricultural products).

2. Alongside the EU and China, Japan's name is repeatedly mentioned from Mr. Trump's mouth.

3. Mr. Trump has repeatedly criticized Japan's rice market and automobile regulations as "unfair" in the past.

and so on.

As the negotiation deadline of July 9 approaches, there is a possibility that uncertainty regarding tariff policies will begin to be felt in the market again. In particular, after a slight decline in April, U.S. stocks have not experienced a substantial adjustment phase. In such an environment, the risk of remarks by President Trump regarding tariffs acting as a factor to depress stock prices in the short term cannot be ignored.

Currently, the main focus of the U.S. market is still on the negotiation trends with China. If there is progress in discussions with China, the market may not react much to negotiations with Japan and other countries. On the other hand, it is believed that the Japanese stock market is more likely to be influenced.

Looking back at the historical statistics of U.S. stocks, the S&P 500 has experienced an average of about three declines of around 5% and one correction of about 10% per year since 1928. Therefore, even if there is a temporary adjustment in the future, it is not particularly surprising in itself. Rather, one should see the adjustment phase as an opportunity to acquire quality stocks at a bargain.

On the other hand, there is a clear upward momentum in the current market, and if there are no disruptive factors, July is also a season that tends to rise. In fact, in the past 10 years, the S&P 500 has risen 9 times in July, achieving a win rate of 90% and an average return of +2.9%, which is a higher performance compared to other months. However, ultimately, the direction of the short-term market is undeniably influenced significantly by statements from President Trump.

This week's focus (week of July 7) is on tariffs and the FOMC minutes.

This week's market highlights (week of July 7) are the "deadline for tariff negotiations" (July 9). If no agreement is reached, market volatility may increase further. Additionally, the "FOMC minutes" (July 10) will be in focus, with hints regarding the Fed's monetary policy stance and timing for interest rate cuts.