From seeing Asia’s trends to knowing markets that stand to benefit
Seeking out opportunities in Asia amid growing wealth, consumption and savviness.
The depth and breadth of the human and economic impact of the current global public health crisis is still unfolding, and the speed and sustainability of the recovery remains uncertain. Against this backdrop, we are considering various scenarios of economic recovery.
3 scenarios of economic recovery2
With a wide range of economic outcomes, our investment team anticipates higher volatility in the months to come and will continue to monitor high frequency activity data as economies re-open alongside continued support from policy globally.
Changing macro backdrop
Global macroeconomic trends are the main driver of asset class returns. We take a macro, focused and flexible approach to investing as we believe that some of the trends and changes shaping the world are significant drivers of asset prices. Trends and changes can unfold over the short, medium and longer term, and we look to capture opportunities across these time horizons and through the business cycle. [Read more: Harnessing global trends to seek investing opportunities]
We are able to quickly shift our positioning3 should the macro backdrop change, for example, if we see a sustained strength in recovery we may add risk or if a significant second wave of virus infections unfolds, threatening recovery, then we can become more defensive.
Our current macro themes
The global economy is generally considered to have entered into a recovery phase. We are witnessing clear signs of inflection in economic momentum as countries emerge from self-imposed stay-at-home measures. The speed and breadth of the recovery is improving but its sustainability remains dependent on the effectiveness of the policy response. Rapid expansion of money supply by central banks has fuelled a recovery in risk assets but sentiment remains mixed against this unprecedented intervention.
New long-term secular trends have also emerged in recent months that could provide significant opportunities for investment. For example:
Focused, flexible strategies3,4
Once the investment team has defined their macro themes, we seek the most efficient reflection of these macro views from across a broad opportunity set of multiple asset classes and through long or short exposures.
Our JPMorgan Investment Funds – Global Macro Opportunities Fund strives to achieve positive returns over its cash benchmark5 in up and down markets4 with expected annualised volatility of less than 10%. In the first five months of 2020, the Fund generated positive returns each month6, and volatility remained low and consistent, despite heightened market volatility.
The Fund is benchmarked5 to cash so the team only invests in assets where we have high conviction in line with our macro views. The Fund holds3 around 50 equity names, as of end-May 2020, predominantly reflecting opportunities in select technology, utilities, financials and consumer discretionary names, demonstrating its focused nature, alongside positions in other asset classes.
There are a number of risks that still remain and are being monitored closely. The re-opening of economies could prompt a second wave of infections, while re-escalating US-China tensions add to uncertainty. Therefore, we seek to manage downside risks from a correction through short-bias equity exposure in the US and emerging markets via futures3. As of end-May 2020, we continue to hold gold3 to reflect the low real-yield environment and have been adding to emerging market debt opportunistically.
As mobility restrictions ease and the global economy restarts, investors are considering the variety of economic recovery scenarios that may unfold and reshape the investment landscape differently. In such an evolving environment, we believe a macro, focused and flexible approach with the ability to invest globally across asset classes has the potential to add value for investors, based on their investment objectives and risk appetite.