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

Guide to the Markets

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Key takeaways:

In recent months, global central banks have moved from displaying a “less hawkish” bias to an outright dovish stance. The question for investors as we head into the second half of 2019 is whether any moves to ease monetary policy will provide enough support to delay the next recession.

In Europe, it’s now clear that rates can/will go further into negative territory, but with limited scope for rate cuts, the market also expects a re-opening of the European Central Banks’s (ECB’s) Asset Purchase Programme. In this environment, we may see a situation where “all boats are floating” once again, with credit and equities both performing. But all that rests on staving off future recessionary headwinds. The next quarter will be very interesting as we watch these events unfold.

Against this challenging backdrop, Guide to the Markets presents a wide range of macroeconomic data that can help liquidity investors assess the economic backdrop and position their portfolios against an uncertain backdrop. This quarter’s Guide covers several key issues for European investors, including:

  • Lead indicators - Purchasing Managers’ Indices and GDP remained relatively subdued during the second quarter. With trade wars showing no near-term signs of abating, manufacturing and export data-especially from Germany-have been significantly impacted. (p. 5, 22)
  • Inflation - Anaemic inflation and collapsing inflation expectations are beginning to challenge the ECB’s credibility with respect to achieving the inflation side of its mandate. (p. 7, 8, 27)
  • Domestic demand - Market participants will be closely watching whether the downturn in external demand will spill over to domestic demand. (p. 25, 26)

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