Oh Gun-young, head of Shinhan Bank's Premier Pathfinder division, advised investors on the 9th not to focus excessively on whether the Federal Reserve raises interest rates, but rather on the economic environment driving those rate decisions. In an interview with Yonhap Infomax, Oh stated that the critical factor is not the rate level itself but what market participants expect from monetary policy changes. This interview is part of a four-part series examining asset management strategies from South Korea's four major financial groups, covering macroeconomic outlook, portfolio strategy, and global asset allocation amid shifting conditions including interest rates, exchange rates, artificial intelligence developments, and geopolitical risks.
Oh Gun-young Emphasizes Economic Environment Over Rate Levels
Oh Gun-young challenged the common assumption that rising interest rates automatically lead to falling stock prices. "It's not that everything becomes difficult when rates rise, nor do stock prices necessarily fall. Even in a rising rate environment, there can be companies showing growth that exceeds the rate increase," Oh said. He argued that macroeconomic analysts should ask "which companies can withstand a rising rate environment" rather than simply deciding to sell stocks because rates are rising. "When the environment changes, the questions investors ask must also change," he stated.
![Oh Gun-young, head of Shinhan Bank's Premier Pathfinder division]()
Market Expectations Drive Asset Prices More Than Rate Changes
Oh cautioned against the market's excessive focus on whether the Federal Reserve will raise rates. "Right now, everyone is looking at interest rates. But what matters more than the rate itself is what expectations people have about that rate," he explained. According to Oh's assessment, the market is currently more focused on the monetary policy path after potential rate hikes rather than the hikes themselves. "The Fed is saying through its dot plot that it will raise rates this year but cut them next year. The market has already substantially priced in the possibility of one or two hikes this year. If that's the case, the market looks beyond the rate hikes themselves," Oh stated. He added that this differs from previous cycles when rates were raised continuously to establish a rate cycle, emphasizing that what the market expects and whether actual results meet those expectations matters more.
Diversification Protects Portfolios Against Concentrated Risk
Oh warned against betting all investment decisions on a single future scenario. He described macroeconomic analysis not as making definitive predictions about the future, but as preparing for various possibilities within a changing environment. "In the past, I sometimes found people who talked about diversification the most frustrating. But portfolio theory emerged because we don't know the future, and it won a Nobel Prize in Economics precisely because we cannot know the future," Oh said. He emphasized that "the stronger the concentration, the more vulnerable to even small shocks. You need diversification to withstand the market for a long time and continue investing over the long term."
![Oh Gun-young, head of Shinhan Bank's Pathfinder division]()
Long-Term Portfolios Require Both Growth and Stable Income Assets
For long-term investing, Oh suggested considering entire countries and asset classes rather than individual stocks. "One approach is to think about which countries will grow more over the next 10 or 20 years and divide your portfolio according to those weightings. Indices are structured to continuously replace winners and losers over time, making them one of the proven investment methods for long-term investing," he explained. Oh advised that long-term portfolios should include not only growth assets but also assets providing stable cash flow. "While you need assets like semiconductors to hold long-term, you shouldn't construct a portfolio with only those. You also need assets like U.S. bonds that generate stable cash flow over the long term to withstand unexpected risks," he stated. He continued, "There are plenty of cases where companies that were once number one in market capitalization were pushed out from the market's center over time. Just because an asset is good now doesn't mean you should assume it will always be a good asset."
AI Investment Requires Caution Against Single-Scenario Assumptions
Oh's perspective on artificial intelligence followed the same logic. While acknowledging AI's potential to increase productivity and transform economic structures, he cautioned against defining the future with a single scenario. "It's dangerous both to assume AI will solve all problems and to conclude that all jobs will disappear. Whether the benefits of technological advancement will be distributed equally to countries, industries, and individuals is still unknown," Oh said. He added, "What's important in investing is the principle of 'preparing for danger in times of safety.' Especially when the market is good, the attitude of preparing for risks that may come next becomes the strength that protects your portfolio in the long term."
FAQ
Why does Oh Gun-young say investors should focus on environment rather than interest rate levels?
Oh Gun-young stated that the economic environment creating interest rate changes matters more than the rate level itself because even in rising rate environments, companies showing growth exceeding the rate increase can exist. He argued that when the environment changes, the questions investors ask must also change from "should I sell stocks because rates are rising" to "which companies can withstand a rising rate environment."
What does Oh Gun-young mean when he says market expectations matter more than rate changes?
Oh explained that what the market expects about interest rates and whether actual results meet those expectations matters more than the rate changes themselves. He noted that the Federal Reserve indicated through its dot plot that it will raise rates this year but cut them next year, and the market has already substantially priced in the possibility of one or two hikes this year, meaning the market is looking beyond the hikes themselves to the subsequent policy path.
Why does Oh Gun-young emphasize diversification in long-term portfolios?
Oh emphasized that diversification protects investors against concentrated risk because stronger concentration makes portfolios more vulnerable to even small shocks. He stated that portfolio theory exists precisely because the future is unknowable, and diversification enables investors to withstand the market for extended periods and continue investing long-term. He also advised including both growth assets and stable cash-flow assets like U.S. bonds to withstand unexpected risks.
