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

Guide to the Markets

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Key takeaways:

The eurozone recovery remains broad-based and the cyclical momentum is still pointing towards relatively strong growth for 2018. Inflation, and specifically wage inflation, remains a well-publicised concern for the European Central Bank (ECB), and although we have seen small improvements in this metric we are still far from target rates. (p. 8, 24, 26).

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

  • Lead indicators, such as the purchasing managers’ indices (p. 5, 21), have undoubtedly slowed in the quarter, albeit from above-trend growth levels. Considering risks of a global slowdown fuelled by a trade war have increased, investment intentions, and consumer and business confidence data, will need to be closely monitored.
  • Household consumption remains the main driver of economic growth. The improving labour market dynamics outlined above, allowing a decline in the household savings rate and the confidence to embrace credit, has been a clear positive contributor (p. 21, 23). With unemployment continuing to trend downwards (p. 24, 25), we expect consumer confidence and spending to remain elevated in 2018.
  • The ECB president confirmed that asset purchases will be tapered from EUR 30 billion to EUR 15 billion until the end of the year and then stop, but warned that interest rates will remain at current levels “at least through the summer of 2019”, which is later than expected. At time of writing, implied forwards are pricing lift off for rates by the end of 2019 and zero only by November 2020, which is still quite some time away.

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