Overview Executive Summary Matrices
Our broad volatility forecasts are little changed compared with last year, despite the spike in financial asset volatility at the beginning of 2018.
With major markets becoming further entrenched in late-cycle dynamics, more frequent volatility spikes are likely — but we see little in the way of structural change to alter our long-term view.
Late cycle highlights the need to pay attention to the left-tail risks of financial assets. We remind investors that return distributions for financial assets are non-normal, with a higher probability and magnitude of left-tail returns, notably in equities and especially in credit.
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The magnitude of left-tail risk for risk assets is historically higher than their theoretical values, assuming normal distribution
HISTORICAL VALUE AT RISK (VaR) AND CONDITIONAL VALUE AT RISK (CVaR) VALUES IN MONTHLY RETURNS, WITH THEIR THEORETICAL VALUES, ASSUMING NORMAL DISTRIBUTION (IN PARENTHESES)
Source: J.P. Morgan Asset Management; historical estimates with monthly return data from February 1990 to June 2018.
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Examine our return projections by major asset class, their building blocks and the thinking behind the numbers.