The Weekly Strategy Report (May 20, 2019) - J.P. Morgan Asset Management
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The Weekly Strategy Report (May 20, 2019)

Contributor Multi-Asset Solutions
In brief
  • After several months of calm, recent weeks have brought a resurgence of international trade disputes; the U.S. and China raised tariffs again on each other’s goods, and other trade issues continue to ferment.
  • Although the tariff hikes should generate limited direct costs, knock-on effects through financial market moves or private sector confidence could prove significant.
  • Damage to other countries might exceed the hit to the U.S. and China (especially considering the latter’s willingness to use counter-cyclical stimulus) and could postpone the recovery in global industry we previously expected to occur around mid-year.
  • With tariff hikes likely to boost reported inflation even as they drag on growth, we see little near-term implication for monetary policy.
  • The return of trade disputes cuts against the more constructive fundamental view on equities that we recently adopted, although as a result of renewed trade tensions, valuations have moved in favor of stocks and against bonds.
EXHIBIT 1: CAPEX WEAKENED LAST YEAR IN TRADE-EXPOSED ECONOMIES

EXHIBIT 1: HARD DATA HAVE HELD UP BETTER THAN SURVEYS SUGGEST

Saar: Haver Analytics, J.P. Morgan Asset Management Multi-Asset Solutions; data through 4Q18

The Weekly Strategy Report (May 20, 2019)

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