Trying to stay positive in a negative world

In the first half of 2019, J.P. Morgan surveyed respondents at a time of slowing global growth momentum, late in the business cycle. The U.S. had led what would quickly become a worldwide pivot toward monetary policy easing, the first since the global financial crisis. Not least, geopolitical uncertainties and trade tensions were looming large in investors’ minds. As our survey reports, demand for money market funds is strong, and investors with short-term fixed income portfolios continue to seek out the strategies and cash management solutions that can best help them navigate a changing environment.

Europe: Easier monetary policy, looming geopolitics

In the UK and Europe, the macroeconomic picture is mixed, under the shadow of a possible no-deal Brexit and continuing trade tensions that have especially hit exporting manufacturers. Eurozone growth and inflation projections remain below central bank targets, though in the UK resilient consumers and robust wages and employment have provided some offset.

Asia-Pacific: Multiple headwinds as currencies weaken

Asian investors were facing multiple headwinds as our survey was conducted: escalating trade tensions, slowing growth, muted inflation and weak domestic demand regionally. Following the Federal Reserve’s (Fed’s) lead, Asian central banks turned more dovish, and further interest rate cuts are expected — a significant pivot from a few months ago, when the forecast was for rate hikes and steeper yield curves. Lower yields have reanimated the cash management challenges of identifying good investments and locking in reasonable yields.

Major Asia Pacific currencies weakened markedly around the time of our survey. The Chinese renminbi breached the psychologically important seven per USD level in August, and the Australian dollar, the Hong Kong dollar and even the safe haven Singapore dollar declined significantly, carrying implications for regional cash investors.

U.S.: Relative outperformance

The Federal Reserve’s dovish policy reversal in early and mid 2019 — culminating in the first policy rate cuts since the global financial crisis—was on our survey respondents’ minds. Further easing was expected, in response to trade tensions and slowing global inflation and growth, though the pace of cuts remained unclear. Still, compared with other developed markets, the U.S. environment looked benign, as U.S. growth and unemployment were close to the Fed’s target rates.

Some of the economic outperformance could be traced to the effects of fiscal stimulus, which were, however, expected to further dwindle in the coming year, lifting the chances that the global deceleration could drag the U.S. down with it. However, any potential downturn would likely be much weaker than the Great Recession, given the current strength of the U.S. consumer and the relative health of bank balance sheets.

As investors re-evaluate their cash management decisions — an often demanding but always critical process — they will greatly benefit from a peer comparison. It can reveal how their policies and practices resemble, and differ from, those of their peers. In this regard, the J.P. Morgan Global Liquidity Investment PeerView survey can serve as an indispensable industry benchmark.

Our survey included responses from 346 CIOs, treasurers and other senior cash investment decision-makers around the world: Americas 153; Europe 116; and Asia 77.

Respondents represented companies and organizations from all sectors of the economy, from industrials and technology to financial services and health care, with cash balances from less than USD 500mn to USD 5bn and more.