South Korean Political Turmoil and Market Reactions #

South Korean President Yoon Suk Yeol declared martial law late Tuesday night amidst escalating political tensions. However, early Wednesday morning, Yoon lifted the martial law after the National Assembly voted to overturn his decree. The recent clash between Yoon and the opposition party over the 2025 budget has intensified, with opposition lawmakers reportedly planning to propose a bill to impeach the president.

As the political events unfolded, South Korean markets experienced volatility. On Wednesday, the Kospi index dropped approximately 1.6%, impacted by declines in major stocks like Samsung Electronics, Hyundai Motor, and Korea Gas Corporation. The South Korean won initially plummeted to a two-year low against the U.S. dollar before slightly rebounding but still ended lower.

In response to the economic uncertainty, the Bank of Korea announced measures to boost short-term liquidity and offer special loans to stabilize financial and foreign exchange markets. Analysts anticipate that these market impacts may be “short-lived” pending proactive policy responses.

Globally, markets showed varied reactions on Tuesday. The S&P 500 remained flat, the Dow Jones Industrial Average experienced a slight drop, while the Nasdaq Composite rose. Asia-Pacific markets were mixed, with Australia’s S&P/ASX 200 decreasing by 0.38% following reports of unexpectedly slow GDP growth.

Opportunities Amid Global Uncertainty #

Beyond South Korea, France is grappling with its political challenges as lawmakers there move toward a vote of no-confidence against the government. Such political instability creates potential trading opportunities as markets adjust.

December usually sees a chill in stock activity, but historically, it’s the third-best month for gains. Traditionally, presidential election years see even stronger performance, as December typically ranks as the second-best month. Observations have indicated that when the market rises by 10% or more with a newly elected President, it typically remains robust throughout December.

Investors are keenly eyeing the upcoming U.S. jobs report for November, which will provide the Federal Reserve crucial data ahead of its rate-setting meeting in mid-December. Current market expectations suggest a 73.8% chance that the Fed will lower rates by 25 basis points, up from the previous week’s 59.4% probability. A rate cut could potentially boost the markets as the year concludes.