Stock Investing 2026: Assessing Earnings and Liquidity

Stock investment opportunities should be judged by earnings prospects and purchase prices, not the intensity of fear. Semiconductor earnings growth has been confirmed. But an increase in liquidity alone does not guarantee rising stock prices. Set your investment allocation based on when you will need the money.

Corporate earnings figures are based on company announcements made on April 7 and October 28~29, 2026.

Facts Confirmed by Semiconductor Earnings

Samsung Electronics' reported operating profit growth of 755% is an actual announced figure. However, it refers to preliminary results for the first quarter of 2026. It should not be interpreted as an annual growth rate or as the upside potential of the current share price. Samsung Electronics' First-Quarter Preliminary Results Announcement

If you are making a decision in November 2026, you should also check the third-quarter announcements. Samsung Electronics cited expanded HBM4 sales as a driver of its results. SK hynix also reported increased sales of high-value server products. The two companies' announcements show that AI-related demand translated into earnings. Samsung Electronics' Third-Quarter Results Announcement, SK hynix's Third-Quarter Results Announcement

SK hynix stated that its accounting review was not complete at the time of the announcement. When reading subsequent reports, check whether the figures have been revised. Figures announced by a company should be distinguished from financial statements whose audit or review has been completed.

Earnings growth alone cannot tell you how long a boom will last. You also need to examine the expectations already reflected in the current share price. An investment decision requires assessing whether future sales volumes and prices can be sustained.

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For telecom infrastructure, check how each company’s orders translate into earnings.

Criteria for Judging Undervaluation Using Forward P/E

Forward P/E is the current share price divided by expected earnings per share. Earnings per share is the net income attributable to one share of stock. Operating profit cannot be used directly as the denominator in a P/E ratio. CFA Institute's Explanation of Price Multiples

• Trailing P/E: A measure that uses earnings per share from recent results
• Forward P/E: A measure that uses expected future earnings per share
• 12-month forward P/E: A measure that uses expected earnings per share for the next 12 months
• Fiscal-year forward P/E: A measure that uses expected earnings per share for a specific fiscal year

A forecast of KRW 300 trillion in annual operating profit alone is not enough to calculate a P/E of 4. First, identify which company the forecast concerns. Then check its expected net income and number of shares. The date of the share price is also needed for the calculation.

The claim that the S&P 500 trades at less than 20 times earnings also needs a reference date. The claim that the KOSPI trades at 8~9 times earnings likewise requires checking the source of the calculation. These figures have not been verified as current market values in this article. Check the period covered by the earnings forecast in your brokerage's explanation of the metric.

A low P/E may reflect expectations of declining earnings. Companies that are highly sensitive to economic conditions can have low P/E ratios during a boom. You therefore need to assess whether current earnings can be sustained under normal conditions. CFA Institute explains the use of normalized earnings per share in this type of analysis.

Differences Between M2, TGA, and Reverse Repos

These three indicators cover different pools of money. M2 is a monetary measure that includes cash and deposits. TGA is the U.S. government's general account at the Federal Reserve. Reverse repos refer to short-term transactions that financial institutions and others conduct with the Federal Reserve.

The components of M2 in South Korea and the United States are not identical. The Bank of Korea and the Federal Reserve provide definitions in their respective statistics. When comparing countries, also use the same basis for growth rates. Bank of Korea's Explanation of M2, Federal Reserve H.6 Money Stock Statistics

Does an Increase in M2 Mean Money Is Entering the Stock Market?

An increase in M2 does not directly show the amount of stock purchases. That is because an increase in deposits can be included in money supply growth. The absolute size of the money supply should be distinguished from money flowing into the stock market. M2 growth alone also cannot tell you when stock prices will rebound.

M2 statistics are released monthly. Describing M2 as setting new highs every day therefore does not match its release frequency. To determine whether it is at a record high, compare it with historical values from the same series.

Is a Large TGA Balance Favorable for Rising Stock Prices?

The TGA balance alone cannot determine the direction of the stock market. Government spending can increase bank reserves, all else being equal. Conversely, tax payments and Treasury issuance can reduce reserves. The Federal Reserve Bank of St. Louis explains these relationships between accounts. Explanation of the Federal Reserve's Balance Sheet and Reserves

Money in the TGA is used for government spending and cash management. There is no basis for classifying that balance as money waiting to buy stocks. Where the money goes after it is spent must also be checked separately.

Does a Decline in Reverse Repos Mean Tightening Has Ended?

A decline in reverse repo usage alone does not establish that tightening has ended. The Federal Reserve describes ON RRP as a supplementary tool for managing short-term interest rates. These transactions change the composition of the Federal Reserve's liabilities. They do not directly change the size of its securities holdings. Federal Reserve's Explanation of ON RRP

Money leaving reverse repos can move into Treasury bills and other instruments. The Federal Reserve's 2025 analysis also confirmed such shifts. The entire decline in the balance should therefore not be counted as money flowing into the stock market. Federal Reserve Analysis of MMF Asset Allocation

Comparing Semiconductors, Renewable Energy, and Telecommunications Infrastructure

To assess whether a company benefits from increased AI investment, check whether that investment translates into revenue for the company. Even companies in the same industry have different customers and contract structures. The table below provides criteria for review, not a ranking of stocks to buy.

The IEA recorded 17% growth in global data center electricity demand in 2025. The figure appears in its 2026 report. It supports the case for expanding electricity demand. It does not represent the earnings growth rate of any individual renewable energy company. IEA's Key Questions on Energy and AI

Supplying electricity requires grids and storage systems as well as generation facilities. The IEA identifies grid connection delays as a constraint. When reviewing a renewable energy company, check which projects it supplies. Distinguish contracts linked to data center demand from those that are not.

Telecommunications infrastructure also needs to be separated by business area. Data center networking equipment and mobile network equipment serve different sources of demand. Samsung Electronics reported a decline in its networks business results for the third quarter of 2026. This shows why a semiconductor boom cannot be assumed to extend to every telecommunications business.

Hidden AI Investment Concentration Risk Across Different Industries

Holdings spread across different industries can still depend on the same demand. Holding both semiconductor and power equipment companies is one example. If telecommunications equipment holdings also depend on AI data center investment, concentration increases. This risk follows from the industry connections described above.

In this situation, check shared customers and funding flows rather than the number of stocks held. Reduced investment by a major customer can affect several companies in your portfolio. Do not assume you are diversified simply because the stocks have different names.

• Customer concentration: Whether the companies depend on the same major customer's investment budget
• Demand concentration: Whether they are linked to the same demand for data center construction
• Financing-condition concentration: Whether rising interest rates affect funding for multiple businesses
• Schedule concentration: Whether grid connection delays postpone deliveries by several companies at once

The SEC describes diversification as spreading risk across different investments. Asset allocation alone does not complete diversification. You also need to examine the composition of your actual holdings. SEC Guide to Asset Allocation and Diversification

Cash Allocation by Investment Circumstances

An allocation of 60~70% to stocks and 30~40% to cash is not a universal answer. Your cash allocation should match your investment goals. The SEC also explains that no single allocation fits every goal.

Cash is a way to meet planned expenses. It can also provide funds for additional purchases. However, holding cash does not itself guarantee investment returns. Changes in purchasing power due to inflation also need to be considered.

Buying in stages spreads purchases over time. If a company's value deteriorates, losses can occur even when purchases were spread out. Before buying more, check whether your original investment rationale still holds.

Common Mistakes When Treating Falling Stock Prices as an Opportunity

A price decline and undervaluation are different assessments. Undervaluation means judging that a price is low relative to expected earnings. If earnings expectations have also fallen, a price decline alone does not make the investment more attractive.

Geopolitical events can change a company's costs and operating environment. Samsung Electronics' earnings conference materials also note the uncertainty of forward-looking statements. Factors include changes in exchange rates and interest rates. The materials warn that future results may differ substantially from forward-looking statements. Cautionary Notes for Samsung Electronics' First-Quarter 2026 Earnings Conference

What to Check Before Buying, in Order

Starting with how the money will be used makes it easier to maintain consistent criteria for buying decisions. Apply market forecasts after that. The sequence below is intended to help you decide how to respond if your forecasts turn out to be wrong.

1. Write down when you will need the investment funds. Separate the money needed for planned expenses.
2. Check the reporting period covered by the earnings data. Also mark whether the figures are preliminary.
3. Record the source and preparation date of the earnings forecast. Distinguish operating profit from net income.
4. Reassess the investment's appeal at the current price. Use comparisons based on the same criteria.
5. Check the risks shared by your holdings. Calculate the total amount invested in assets linked to AI investment.
6. Write down the conditions for buying more and reducing your allocation. Also decide how to respond if corporate earnings change.