Guide to the Markets - J.P. Morgan Asset Management

Guide to the Markets

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Key takeaways:

In the second quarter of 2017, the UK investment landscape was dominated by politics. The shock result of the UK election is now behind us, but uncertainty looks set to continue, with all eyes on the progress of Brexit negotiations and the impact on economic activity.

Guide to the Markets presents a wide range of macroeconomic data that can help liquidity investors assess the economic backdrop and position their portfolios. Among the issues discussed:

  • The UK economy is losing momentum, with first-quarter GDP dropping to 0.2% quarter-on-quarter from 0.7% in the fourth quarter of 2016. (p.4, 5, 6, 10)
  • Reduction in real incomes has dealt a severe blow to the UK consumer-a key positive driver of economic growth in recent years. Brexit-related uncertainties are also limiting capex and foreign direct investment, all of which bodes ill for near-term growth. Inflation and its steady drive higher is a key theme and one that is currently sparking debate among the Monetary Policy Committee. (p.4, 5, 6, 10)
  • We expect rates markets to remain volatile through 2017. For the UK, we struggle to see where the net positive news will come from: political uncertainty is heightened, Brexit negotiations have started and economic data is at best mixed. With wage inflation expected to remain muted and the consumer increasingly squeezed, we forecast a slowdown in activity and a central bank in monitoring mode. We believe that if the Bank of England were to raise interest rates, it would only look to add back the 25 basis points it cut as part of its post-Brexit policy response, so any potential move higher would be one-off in nature and not part of a steady tightening cycle.

As you consider these important topics, we will be happy to share our market views and tailor liquidity solutions to best meet your needs.