Skip to main content
logo
  • Funds

    Fund Explorer

    • Search our funds

    Capabilities

    • Fixed Income
    • Equities
    • Multi-Asset
    • Alternatives
    • ETF Capabilities

    Fund Information

    • Fund news and announcements
    • Regulatory updates
    • Capacity management
  • Investment Themes
    • Sustainable investing
    • Strategic Beta
    • Fixed income investing
    • Market volatility
    • Investing in China
  • Insights

    Market Insights

    • Guide to the Markets
    • Guide to Alternatives
    • On the Minds of Investors
    • The Weekly Brief
    • Investment Principles
    • Investment Outlook
    • Monthly Market Review
    • Insights App
    • ESG Explained

    Portfolio Insights

    • Bond Bulletin
    • Monthly Strategy Report
    • Asset Allocation Views
    • Fixed Income Views
    • Equity Views
    • Factor Views
    • Emerging Market Debt Strategy
    • Long-Term Capital Market Assumptions
    • Global Alternatives Outlook
    • ETF Perspectives

    Webconferences

    • Webconferences
  • Library
  • About Us
  • Contact Us
  • Role
  • Country
  • Search
    Search
    Menu
    1. Risks of asset allocation in this business cycle

    • LinkedIn Twitter Facebook
    JPMorgan Market Insights Outlook Asset Allocation


    The challenges of asset allocation in this cycle
     

    Although timing the cycle is never an easy task, historically investors have been wise to gradually reallocate a proportion of a portfolio from equities to fixed income and cash as the cycle matured and the central bank raised rates. Even if investors moved too early with such a reallocation and equity prices pushed ever higher, they at least received a decent yield on their core government bonds, with the promise of capital returns when interest rates were eventually cut.

    Global bond yields

    % of BofA/Merrill Lynch Global Government Bonds Index

    Source: Bloomberg, BofA/Merrill Lynch, J.P. Morgan Asset Management. Index shown in the BoFA/ML Global Government Bond index. Past performance is not a reliable indicator of current and future results. Data as of 31 May 2019.

    The fact that central banks have not managed to normalise interest rates in this cycle makes it much harder for investors to seek shelter and wait out any storm while at the same time maintaining any kind of decent return.

    Moreover, derisking aggressively will prove costly if slowing economic data and a falling stock market prompt the US administration to reassess its trade agenda. The president walks a fine line between wanting to appear tough on trade to fulfil his “America First” electoral promises, and wanting a strong economy and an electorate feeling confident about job prospects ahead of the election in November 2020.

    Valuations on a forward-price-to-earnings (P/E) basis are near their historical norms in most parts of the developed world, although our suspicion is that these are predicated on earnings forecasts that are a bit too high. Nevertheless, markets are not painting a screamingly optimistic picture, which provides comfort in terms of the scale of downside risk. The emerging market benchmarks and Japan are the key parts of the global market in which forward P/Es sit at a discount relative to their recent history.

    Global forward price-to-earnings ratios

    X, multiple

    Source: IBES, MSCI, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Earnings and valuation charts use MSCI indices for all regions/countries, except for the US, which is the S&P 500. EM is emerging markets. markets. Past performance is not a reliable indicator of current and future results. Data as of 13 June 2019.

    Download the full update

    Related Articles

    Central scenarios and risks

    Explore all our key economic scenarios and risks for the second half of 2022 in our Mid-Year Investment Outlook.

    Read more

    Where to hide if stagflation takes hold

    In our Mid-Year Investment Outlook 2022, we analyse the stagflation of the 1970s and make a few observations about investing in this environment.

    Read more

    Still value in value

    Value has outperformed growth significantly this year. Our Mid-Year Investment Outlook explains why we think value stocks still look attractive.

    Read more

    This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not a reliable indicator of current and future results.
     

    J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy.
     

    This communication is issued in Europe (excluding UK) by JPMorgan Asset Management (Europe) S.à r.l., 6 route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg, R.C.S. Luxembourg B27900, corporate capital EUR 10.000.000.

    J.P. Morgan Asset Management

    • Terms of use
    • Privacy policy
    • Cookie policy
    • Accessibility statement
    • Sitemap
    • Investment stewardship
    Decorative
    J.P. Morgan

    • J.P. Morgan
    • JPMorgan Chase
    • Chase

    Copyright © 2022 JPMorgan Chase & Co., all rights reserved.