Investment Directors’ Bulletin (February 2016)Contributors Edmund Brandt, Edward Walker
Edmund Brandt and Ed Walker write in their capacity as investment directors. Their asset allocation views are based on a 12-month time horizon and reflect the input from various investment teams within J.P. Morgan Asset Management. The discussions are considered with Edmund and Ed ultimately producing their views on the regions in terms of underweight, neutral or overweight.
A difficult start to 2016 for global equities
January proved a very painful month for world stock markets. In local currency terms, the MSCI World Index finished down 5.4%. All regions fell, with the S&P 500 (-5.0%) falling modestly less than the world average, while the Europe ex-UK index (-6.0%) and Japan’s TOPIX (-7.4%) fared worse. Of note, the MSCI Emerging Markets index moved in step with developed markets, correcting by -5.2%.
The key concerns for asset allocators are currently as follows:
- Concern that any further US interest rate increases in 2016 will tip both American and global growth into recession.
- Fears that China will suffer a hard economic landing with material spill-over effects on world trade and also currency markets.
- The latest dive in the oil price and rise in credit spreads has increased anxiety about global growth trends.
- Earnings-per-share (EPS) growth prospects remain under pressure in all regions.
Coming up in the Bulletin
- Entering bear market territory
- Don’t panic! Asset allocation changes should not be rushed
- Where to look for relief?
- Tactically we are cautious in the near term, but still positive on equities longer term
- Asset allocation
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