The 'Real Rate' That Breaks the Stock Market Is Different… Two Signals Repeated in 120 Years of Market History | Hong Seon-ae, Lee Eun-taek, KB Securities Asset Allocation Strategy Director

Summary

Lee Eun-taek of KB Securities explains that the US 10-year Treasury yield above 5% is not yet a bubble-collapse trigger, because past collapses required a sustained break to 10-20 year yield highs and a no-way-back inflation shock. He sees the KOSPI as likely forming a W-shaped double bottom and outlines a Korean long-bond strategy for after equity crashes. He also presents simple equity timing rules: in low-inflation eras, rising unemployment is the key sell signal, while in high-inflation eras, investors should buy equities after inflation peaks.

• KOSPI fell about 30%; the guest sees the current bottom most likely forming as a W-shaped double bottom rather than a V or triple bottom.
• V-shaped rebounds are rare; W bottoms usually need 2-4 months of consolidation and painful second-bottom selling.
• A US 10-year Treasury yield above 5% is not sufficient for a bubble collapse; a sustained break above 5.0-5.3% and no-way-back inflation are required.
• Korean government bond yields have risen much; falling equities imply weaker GDP in 6-12 months and can make long-dated bonds attractive.
• In low-inflation eras, rising unemployment is the key sell signal for stocks.
• In high-inflation eras, inflation is king; equities historically bottom about one quarter after CPI peaks.
• AI capex and capital suppliers matter for bubble risk, but the main transmission is through rates and inflation.