Weekly Strategy Report (February 19, 2018) - J.P. Morgan Asset Management
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Weekly Strategy Report (February 19, 2018)

Contributor Multi-Asset Solutions
In brief
  • The bond market sell-off has been broad-based – across regions and across the curve. Just as the strength in growth has been synchronized, so too has the rise in global bond yields.
  • A range of factors is pushing yields higher: firming U.S. inflation amidst strong growth, U.S. fiscal expansion as well as less accommodative policy from major central banks.
  • On a 12-month basis, we are moderately underweight duration, while noting that yield rises remain constrained by a gradual tightening cycle from the Federal Reserve (Fed). Moreover, easy policy from other central banks caps how far yields can rise.
  • We recently revised our yield forecast range higher to 2.5%-3.15%. At current levels, we acknowledge the two-way risks around duration.
  • Higher yields are not inconsistent with strong risk asset performance – as long as yield moves are commensurate with the economic backdrop. We maintain a pro-risk stance within multi-asset portfolios.
EXHIBIT 1: HIGHER FISCAL DEFICITS FROM TAX REFORM AND FISCAL SPEND RAISE TREASURY ISSUANCE


Source:Source: J.P. Morgan Asset Management Multi-Asset Solutions; data as of February 13, 2018. For illustrative purposes only.

The Weekly Strategy Report (February 19, 2018)

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