"Black Tuesday", Korean Style...Now What?

1.) KOSPI – Not many US citizens care much about South Korea, much less what happens to their stock market. We do. Yesterday, the KOSPI 200, South Korea’s equivalent of the S&P 500, suffered its worst day ever, falling nearly 10% in a single session. Some there are calling it “Black Tuesday.” Why do we care? If you want to understand what’s happening with stocks, South Korea is one of the first places to look. It really isn’t about South Korean stocks, per se, as much as it might be about tech. Different countries tend to specialize in different industries, which means certain markets give us valuable clues about specific corners of our own. Peru and South Africa can tell us a lot about metals and mining stocks. European banks can provide a useful read on the health of the global banking system. South Korea is one of the best places in the world to monitor semiconductors and technology hardware. Its stock market is dominated by companies like Samsung Electronics and SK Hynix, two of the biggest beneficiaries of the AI boom. What makes this week’s decline so interesting is that it didn’t happen in a vacuum. At the same time Korean technology stocks were getting hit, semiconductor stocks in the United States were under pressure, too. Some are “freaking out” about the whole “Black Tuesday” headline floating around. But after the run we’ve seen in semis, memory, and AI infrastructure, a little profit-taking shouldn’t surprise anybody. Besides, this has happened before. Back in March, the Korean market suffered an almost 20% decline in just two days. By April, it was already making new all-time highs. Earlier this month, we saw another sharp correction that was quickly erased. Buyers stepped right back in and pushed prices to fresh highs. How things develop from here will be telling. My thoughts? These sectors are just due for some consolidation. That can come in the form of lower prices or sideways movement. The good news is that money doesn’t appear to be leaving stocks altogether. It’s just rotating. While semiconductors struggled all through Tuesday’s session, software stocks quietly spent the day moving higher. Healthy bull markets often rotate leadership—they don’t lose it. If weakness in South Korea continues, I’d expect continued pressure on semiconductors and technology hardware in the U.S. as well. For now, the KOSPI ended up +3.26% for today. A little bounce. Whether that turns into a buying opportunity or the start of a larger correction remains to be seen.

2.) PRODUCTIVITY – There are a lot of people afraid of AI and what might happen: AI taking jobs, replacing humans, or just outright killing everyone. Cyberdyne in real time. Like all tech, it has the capacity to be used for great good and evil at the same time. But in terms of economics, productivity growth is increasing! And if US productivity growth continues to lead the rest of the G10, the US lead in artificial intelligence would probably explain why. The US is the most vibrant and prepared country for AI, with China close behind on some measures. I know some would have you believe that we’re lagging behind China, but the data does not support that.

3.) SALES – Same-store retail sales continue to show exceptional strength, up +10% Year over Year (YoY) for the week ending June 20. The previous increase was up +9.4%. So we continue to see accelerations in important areas of economic activity.