Insights | J.P. Morgan Asset Management

What is the outlook for alternatives in 2022?

There are plenty of opportunities across the alternative investment landscape. However, any allocation to alternatives should be outcome-oriented.

Is the case for international equities just about discounted valuations and currencies?

2022 and beyond should present investors with those in the form of above trend international growth and stabilization in China.

December recap: Are investors positioned for monetary shifts in 2022?

There was no shortage of market catalysts to begin December, with the emergence of the Omicron variant and hawkish comments from Federal Reserve (Fed) Chair Powell stirring the markets.

What will happen to the top 10 S&P 500 companies in 2022?

2021 was a better year than expected for U.S. equities, as a 34.5% increase in earnings expectations offset a 7.6% decline in valuations, leading to a price return of 26.9%.

Is Build Back Better dead?

This week, hopes of passing the Build Back Better (BBB) Act, the climate and social spending package, were dashed when Senator Joe Manchin of West Virginia said he would not vote for it due to concerns over further stoking inflation and increasing the national debt.

Should I expect a year-end correction?

Although lockdowns and restrictions may drag on economic activity in the near term, we see three key drivers of economic growth in 2022.

How can employer-sponsored plans better serve younger adults?

It is key that employers innovate the employee experience for younger professionals. Explore how employer-sponsored plans can better serve young adults.

Has the Federal Reserve (Fed) shifted more hawkish?

Overall, investors should be prepared for an active Fed over the next few years. We expect the Fed to begin raising rates in June, and deliver one hike per quarter thereafter.

Does a continued inflation heatwave mean a more hawkish Fed?

The November CPI report showed consumer prices rising at their fastest pace in nearly 40 years as surging gasoline prices, vehicle prices, and owner’s equivalent rent continued to drive inflation upwards.

November recap: How were portfolios positioned for November markets?

Although risk assets enjoyed positive returns for most of November, the emergence of a new COVID variant and a hawkish pivot from the Fed prompted a risk-off environment to close the month, with investors positioned accordingly.

Is volatility higher because of omicron?

Volatility has come roaring back, with the S&P 500 seeing its worst 2-day performance in over a year and the VIX back above 30 for the first time since February.

When will China’s economy find its footing?

It is now becoming clear that Chinese policy makers no longer focus exclusively on the quantity of growth, but also on its quality. In addition, several other policy goals are taking priority as well, such as deleveraging, decarbonization, common prosperity and public health.

Is Jay here to stay?

President Biden voted for continuity in monetary policy with his renomination of Jerome Powell to another four-year term as Federal Reserve Chair. He also elevated Governor Lael Brainard to Vice Chair, replacing Richard Clarida.

What progress was made at COP26?

Some areas of the agenda were advanced, true progress may have been postponed to the end of 2022, when countries are expected to recommit or strengthen their net zero commitments, which currently fall short of limiting global warming to 1.5 degrees Celsius.

Why are rates moving, just not higher?

Rates have experienced some big swings recently, even though they have traded within a fairly narrow range over the past couple of months.

What does Fed policy mean for a fixed income portfolio?

Looking forward, while we don’t yet know which of the previous periods the next cycle will best resemble, the market is currently pricing Fed “liftoff” in mid-2022, with a total of five hikes complete by the end of 2023.

Where do we stand on infrastructure spending?

From our vantage point, it seems like a given that the President will sign the bipartisan bill into law. Looking at the budget reconciliation package, a deal will get done but it may come down to the wire.

Are all global central banks on the move?

Investors should not paint all central banks with the same brush stroke as normalization will come in different shades: some central banks are already or close to being on the move, others will remain somewhat patient until next year, while others will remain firmly on hold.

How will the FOMC begin to reduce policy support?

Tapering is not tightening, and while purchases will slow in the months ahead, the balance sheet will still expand by roughly $400 billion from now until mid-2022 and settle at around $9 trillion.

When will supply chain disruptions be resolved?

Semiconductors have come into focus as one of the best examples of the supply constraints faced by the global economy.

3Q21 earnings bulletin: Supply pains

Despite a slowdown in 3Q21 economic growth, corporate profits have been better than expected. Investors should use profits as a guide, as rising interest rates could pressure multiples and leave earnings as the main driver of returns.

Inflation: A Somewhat Sticky Situation

As we emerge from this pandemic with inflation now rising at its fastest pace since the 1980s, the biggest question for investors is whether some of this inflation will prove “sticky”.

What can we expect from the U.N. Climate Change Conference?

The last summit in 2015 resulted in the Paris Agreement, an international treaty addressing climate change mitigation (by aiming to limit the increase in global temperatures by 1.5 degrees Celsius above pre-industrial levels), climate adaptation, and climate financing. Therefore, we anticipate meaningful discussion on these topics: achieving net zero, fiscal efforts , climate financing, carbon pricing.

What challenges are the Chinese economy and markets facing?

Recent economic data affirms China’s slowdown as the economy normalizes while still facing lingering pandemic obstacles and the consequences of its intentional long-term reforms.

Has the government run out of funding?

While these fears were warranted following the near technical defaults experienced in 2011 and 2013 due to the same debt ceiling issue, by a narrow vote, the House raised the debt ceiling on October 12th by $480 billion to $28.9 trillion, averting a technical default.

Is inflation still transitory?

While higher inflation and a recent slowdown in economic growth have stoked stagflation fears amongst investors, we continue to expect inflation to tame in the coming months.

Why do investors love technology companies?

Most investors seem to agree that technological adoption looks set to continue, but more and more we see people questioning the price they are paying for this exposure.

Why are oil prices soaring?

While it was expected that easing pandemic conditions would support demand for oil, the move in spot prices this year has caused investors to question whether these price pressures will persist and lead to higher inflation.

Should investors worry about stagflation?

The result of the supply bottlenecks has been slower sales and inventory build-up than desired, depressing growth. In addition, the short supply of goods and services has led to higher prices, with input and output price indices accelerating at record speed this year.

The debt ceiling dilemma: what should investors know?

From an investment perspective, elevated uncertainty will likely fuel additional volatility in both equity and credit markets through the first half of October.

What is behind the rise in volatility?

Rising volatility reflects a broader distribution of outcomes – clearly, the events of recent weeks have forced investors to broaden their horizons and embrace a wider range of scenarios.

Should global investors worry about the Chinese company Evergrande?

Chinese equities can still provide investors higher return and low correlation to other equity markets, while Chinese bonds can provide higher yields and low correlation to the global bond market.

Is Fed tapering all but certain?

The Federal Open Market Committee (FOMC) sent a slightly hawkish signal to markets on its monetary policy outlook, recognizing that the delta variant has slowed economic progress, but also that inflation may prove somewhat stickier than they previously assumed.

What are the driving forces behind ESG investing?

Sustainable investing, which considers environmental, social, and governance factors (ESG), is a philosophy most investors are aware of, but not all may fully understand it, as it has evolved meaningfully over the past few years

How is private equity doing in a post-pandemic world?

As we move into the final months of 2021, it has become increasingly clear that the private market momentum which began to build in the back half of 2020 has shown no sign of abating.

Is the pandemic changing the long-term outlook for Social Security?

Due to pandemic-related unemployment, funding from payroll taxes is down, but this is expected to be temporary, so it shouldn’t set back the program significantly.

Cash crusade: What are banks doing with the cash from quantitative easing?

Until there is a resolution on the debt ceiling, net Treasury bill issuance is likely to remain materially negative in the coming month, putting continued downward pressure on short term interest rates.

Cash crusade: Where does money created via QE actually go?

As tapering moves to the forefront of policy discussions, investors should understand the mechanics of quantitative easing, how money is created and flows into the financial system, and the impact it’s having on financial markets.

Where are Millennials investing their money?

With greater attention being paid to younger Americans by the investment management industry, financial professionals are increasingly curious about the what, why and how of Millennial money management.

What is the cost of extreme weather?

Extreme weather has prompted policy makers to focus on more resilient infrastructure and investments to mitigate climate change, which has meaningfully exacerbated extreme weather events.

When will the semiconductor shortage be resolved?

While a variety of different input costs have been rising, a shortage of semiconductors has led to tight supply and demand dynamics around the world.

What should investors do after China’s increase in regulations?

Investing in China the right way is key: with a portfolio of companies, listed both offshore and onshore, with a manager that has a local presence and can do long-term fundamental analysis.

2Q21 earnings: All about that base

While it may be tempting to chase recent performance, we continue to anticipate that the second half will see interest rates move higher, repricing more in-line with the above-trend pace of economic activity that currently characterizes our forecasts. This should be supportive of cyclical assets broadly, and allow value to outperform growth.

How should investors view the recent Chinese equity sell-off?

This paper, written by Chaoping Zhu, discusses the Chinese new reforms and the subsequent selling pressure in Chinese equities, and what this means for investors.

Progress towards (substantial) progress

The FOMC statement highlighted the continued improvement in economic conditions due to progress on vaccinations, but noted risks to the outlook still remain, largely reflecting the rise in cases over the past few weeks in unvaccinated communities.

Should I be worried about another recession?

It is reasonable to believe that at some point we will see the U.S. economy return to a trend pace of growth, and furthermore, it would not be surprising for the recovery to be a bit more uneven that was originally anticipated.

Millennials: unique challenges for younger investors

Understanding how to properly navigate conversations with Millennials and recognize the unique challenges that face younger investors today are important steps in building a successful relationship with the next generation of wealth.

Navigating conversations with the next generation of wealth

Generational differences can present a challenge when navigating money management. Discover our best practices for making these conversations more fruitful.

Where is inflation heading?

One of the most prevalent concerns among investors today is where inflation is heading next.

What are the investment implications of rising global inflation?

After a sharp drop in 2020, global inflation is rising due to recovering energy, surging goods and normalizing services prices. This reflation signals building momentum in the global economy, a support for credit and equities, especially of cyclical regions like Europe, Japan, and EM ex-North Asia.

What’s the Federal Reserve’s outlook for monetary policy?

At the June meeting, the Federal Open Market Committee (FOMC) signaled a more hawkish stance towards its monetary policy outlook driven by a materially stronger growth and inflation outlook in the medium term.

What do higher wages mean for corporate profits?

The bottom line is that if inflation begins to rise, interest rates will rise, and valuations will come under pressure. So far, 2021 has been characterized by range bound valuations and rising earnings estimates, which has allowed the equity market to trend higher during the first half of the year.

Money Moves: Where are the U.S. equity opportunities and how are investors positioned?

Following the recession in the first half of 2020, U.S. equities rebounded quickly. Today, partly due to this and partly due to the strong domestic reopening story, U.S. equities make up roughly 79% of total investor equity allocation, just 20 bps shy of an all-time high.

How can I prepare for a market correction?

Investors may want to focus on the intersection of valuation and historical volatility when positioning equity portfolios for what could be a bumpy ride this summer.

Why are Emerging Market equities underperforming during this year of the recovery?

EM offers investors access to powerful structural growth stories of the expansion: technological innovation and the rise of the EM Asia middle class, themes that will come back into favor once investors look past the early cycle economic growth surge.

Will job growth disappoint?

A disappointing April report suggested a combination of higher federal unemployment benefits, lingering COVID concerns, and remote schooling constrained job growth, but as many of these factors ease in the coming months, job growth should increase.

What has been going on with cryptocurrencies?

Regardless of one’s personal view, digital assets and cryptocurrencies are becoming an increasingly large part of the global financial system. As such, more and more investors are asking how they should think about them as both investments and currencies.

Which markets have further room to run in the year of the recovery?

Looking ahead, European equities should stay supported given a substantial improvement in vaccinations, upcoming fiscal support, and a sizable valuation discount relative to the U.S. for a market that offers access to both the cyclical recovery and an inflation hedge.

Net zero: What opportunities arise from a carbon neutral world?

The most successful companies of the past decade are not necessarily going to be the leaders of the next decade. Sustainability is likely to be a decade-defining theme, creating opportunities for the next generation of innovative companies.

What do higher taxes mean for retirement outcomes?

How will higher taxes impact retirement savings? Explore how resilience to tax changes can maximize after-tax returns for better retirement outcomes.

Net zero: How can policymakers drive net zero carbon emissions?

Policymakers will be the key drivers of efforts to mitigate climate change, and given the urgency and sheer scope of the challenge, they will need to pull on all of the levers available.

Money Moves: How should investors be positioned within International equities, and where have dollars actually gone?

With future domestic market returns constrained by heightened valuations, other opportunities must be sought out: international equities remain one of the best.

How might the American Jobs Plan impact the municipal bond market?

President Biden’s recently proposed American Jobs Plan outlines a robust strategy to rebuild the nation’s infrastructure, while also including significant funding for clean energy and affordable housing.

Net zero: How do we reach net zero carbon emissions?

Achieving net zero carbon emissions will be no easy feat. It will require major innovation and investment. Therefore, it presents incredibly lucrative opportunities for the companies and countries that succeed.

Should “do-it-yourselfers” invest at all-time highs?

While we cannot time the market, fundamentals remain supportive. With this in mind, investors saving for retirement should be positioned more aggressive in their allocations.

How can companies boost return on equity?

In general, there are three levers that a corporation can pull to boost return on equity – margins can expand, assets can be used more efficiently, or more leverage can be taken on .

Are we in a commodity super-cycle?

All told, the post-COVID global recovery should help to sustain commodity performance in the near-term, a boon for investors looking to hide from inflation or diversify portfolios. However, it seems premature to call this anything more than a strong recovery.

What should investors expect from China’s economy this year?

After this year’s 18% correction in the MSCI China, valuations are now presenting a more interesting entry point. Over the next decade, China’s growing capital markets and its increasing size in the 60/40 portfolio is the most interesting development to watch.

How can I improve my expected rate of return?

2020 was an incredible year in the capital markets. However, in the wake of very strong performance for both stocks and bonds over the past 12-months, as well as the past decade, most traditional assets are looking expensive.

Tax-loss harvesting in a low return world

Active tax management is a way to take advantage of volatility. Volatility is a hallmark of the capital markets, but it also tends to derail investors and undermine their ability to reach their long-term retirement goals. While a diversified approach to investing is a good first step towards mitigating some of this volatility, plain vanilla portfolios may fail to generate sufficient rates of return going forward.

Can international stocks provide a hedge against rising inflation?

Inflation has been a hot topic amongst investors. Globally, inflation is expected to rise this year from 2020’s low levels. This reflation, a sign that the economy is operating above potential, should lead to strong earnings growth as well

What is going on with the “average” stock?

Although we are not inclined to chase recent performance, it seems reasonable to expect that a more balanced approach to equity markets could help investors navigate what remains a very uncertain world.

Should investors be concerned about a “Taper Tantrum” hurting EM?

Later this year, we expect the Fed to announce plans to taper its bond purchases, but EM is better positioned should a surge in real yields occur. In 2013, concerns centered on EM countries that had external vulnerabilities (such as large current account deficits), which left them particularly exposed to capital outflows.

How will the Fed’s decision on the Supplementary Leverage Ratio (SLR) impact markets?

For better or for worse, banks are required to meet various liquidity and leverage requirements. One ratio that measures a bank’s ability to absorb losses is the Supplementary Leverage Ratio (SLR). The SLR formula measures tier 1 capital, which consists mostly of common and preferred stock, as a percent of total leverage exposure.

How could vaccine hesitancy affect the global recovery?

Despite many other measures to help slow the spread of COVID-19, there is only one that can end the pandemic: broad global vaccination.

What has COVID-19 meant for working women?

The Federal Reserve has made it clear that they are laser-focused on returning to full employment. One can only wonder if they will be looking for a durable rise in the overall participation rate, or whether they will take a more granular view and seek more equal progress across the gender spectrum.

What kind of equities should I own if inflation is rising?

The remainder of 2021 should see an acceleration in economic activity, rising inflation, and higher interest rates. In general, this dynamic should support the outperformance of value relative to growth, with attractive relative valuations acting as an additional tailwind for value outperformance.

Fiscal Surge and Easy Money

The pandemic would always have demanded a dramatic response in terms of easy monetary and fiscal policy. However, policy responses have been shaped not just by the needs of the present but by the lessons of the past.

What should investors take away from China’s National People’s Congress?

On March 5th, China began its most important annual political gatherings: the National People’s Congress and Chinese People’s Political Consultative Conference. These events highlight the central government’s priorities for the year ahead, with 2021 also a year with a new Five Year Plan (FYP).

Should I brace myself for higher oil prices?

The March 4th OPEC+ meeting passed with more fanfare than is typically associated with the organization’s biannual summit. As is normal, OPEC countries, led by Saudi Arabia, met with key non-member states to discuss output changes.

How has COVID-19 impacted working women?

The pandemic has presented many challenges for working parents— simultaneously managing full-time jobs, supervising children’s remote learning, and tackling household chores, with fewer options for outside assistance.

Money Moves: How should investors be positioned within the Fixed Income market, and where have dollars actually gone?

Given the modest back-up in yields over the last several months, many investors are wondering if, and how, the role of fixed income in a portfolio might change moving forward.

How will the COVID recovery compare to the Financial Crisis recovery?

Comparing the recoveries of the global financial crisis (GFC) and the pandemic recession is like comparing the tortoise and the hare: the aftermath of the former was slow and steady, while the latter should experience a burst of speed ahead.

How might the TGA drawdown impact markets?

Among the many considerations the Federal Reserve has to take in managing monetary policy, the behavior of the Treasury Department can be one of the more challenging. The Treasury Department holds its cash on deposit in the Treasury General Account at the Fed.

Is a market correction coming?

Most investors believe that the reflation trade will define markets in 2021. However, more and more clients are asking us what could undermine this narrative and precipitate a market correction.

What should I consider when investing for retirement?

A key behavioral misstep investors should always avoid is trying to time the market, and 2020 showed just how detrimental timing the market could be.

Is the recent outperformance of international stocks sustainable?

Investors should always look forward: a new global economic cycle is beginning in which international can take the baton from the U.S.

How has COVID-19 impacted retirement strategies?

The financial stress of 2020 forced many people to tap retirement savings. Explore how emergency reserve funds could have protected retirement strategies.

How is the vaccine rollout progressing?

Following several consecutive announcements of vaccine candidate success in November 2020, markets began pricing in an end to the COVID-19 pandemic.

What is going on with the retail investor?

Markets saw retail investors pile into highly-shorted, small cap equities in an effort to push back on the institutional investment community

4Q20 earnings: The profit engine that could

Investors in 2020 recognized the challenges posed by the pandemic, but believed that with patience, policy support, and a bit of optimism, they would eventually get to the other side. The final earnings reports of 2020 are now being delivered, and the investment community can shift its focus from climbing the mountain to the descent.

Were there any V-shaped recoveries from the COVID recession?

In the end, were there any V-shaped recoveries from the COVID recession? There is only one example around the world: China.

What is the outlook for alternatives in 2021?

Most investors are familiar with the return challenges they may face in the years to come. Elevated equity market valuations and historically low interest rates have led us to forecast that a 60/40 portfolio of global equities and high quality U.S. fixed income will return 4.2% annually over the next 10-15 years.

Monitoring the global impact of COVID-19

The spread of the coronavirus and its impact on global economic activity has materially changed the investment outlook for 2020. In this piece we provide a framework for tracking infection rates globally and monitoring the impact on economic activity.

What’s going on with stock market sentiment?

While fundamentals– valuations, earnings and economic growth – dominate in the long run, the short run is a different matter.

Will American small business fire its workers?

Ultimately, how high the unemployment rate gets is dependent on one key question: will American small business fire its workers, says Manley.

A COVID-driven spike in claims

Initial claims for unemployment insurance surged to the highest level ever: 3,283,000, spiking from a slightly revised 282,000 last week.

The COVID-19 Relief Bill-Holding the Economy in Suspended Animation

This paper, written by Dr. David Kelly, reviews the U.S> relief bill and its investment implications.

What is the Fed doing and what does it mean for fixed income?

The U.S. Federal Reserve (Fed) has pulled out its alphabet bazooka in an effort to ensure sufficient liquidity and the smooth functioning of financial markets, while also providing credit to businesses that are affected by the spread of COVID-19 and the stall in global economic activity.

What will an earnings recession look like?

As economists continue to revise down their 2020 GDP estimates, a lot of clients have been asking us about the potential impact on earnings.

Can the Fed do more?

This past Sunday, the U.S. Federal Reserve (Fed) fired a last desperate salvo in an attempt to stabilize financial conditions, the second emergency inter-meeting cut in two weeks.

What policy response would help to stabilize markets?

Coming into this year, we expected an improvement in global economic growth, as 2019’s policy uncertainty clouds dissipated.

The investment implications of COVID-19: An update

The COVID-19 crisis confirms, once again, the value of a diversified portfolio, says David Kelly.

What does the latest oil price collapse mean for investors?

It is important to avoid trying to predict the future; rather, clients are best served by monitoring the present situation and maintaining composure.

Monetary medicine of limited effectiveness

Even with this Fed action, there will likely be calls for fiscal action to support to businesses suffering from the response to virus fears, says David Kelly.

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MARKET COMMENTARY

What is the outlook for alternatives in 2022?

Is the case for international equities just about discounted valuations and currencies?

December recap: Are investors positioned for monetary shifts in 2022?

What will happen to the top 10 S&P 500 companies in 2022?

Is Build Back Better dead?

Should I expect a year-end correction?

How can employer-sponsored plans better serve younger adults?

Has the Federal Reserve (Fed) shifted more hawkish?

Does a continued inflation heatwave mean a more hawkish Fed?

November recap: How were portfolios positioned for November markets?

Is volatility higher because of omicron?

When will China’s economy find its footing?

Is Jay here to stay?

What progress was made at COP26?

Why are rates moving, just not higher?

What does Fed policy mean for a fixed income portfolio?

Where do we stand on infrastructure spending?

Are all global central banks on the move?

How will the FOMC begin to reduce policy support?

When will supply chain disruptions be resolved?

3Q21 earnings bulletin: Supply pains

Inflation: A Somewhat Sticky Situation

What can we expect from the U.N. Climate Change Conference?

What challenges are the Chinese economy and markets facing?

Has the government run out of funding?

Is inflation still transitory?

Why do investors love technology companies?

Why are oil prices soaring?

Should investors worry about stagflation?

The debt ceiling dilemma: what should investors know?

What is behind the rise in volatility?

Should global investors worry about the Chinese company Evergrande?

Is Fed tapering all but certain?

What are the driving forces behind ESG investing?

How is private equity doing in a post-pandemic world?

Is the pandemic changing the long-term outlook for Social Security?

Cash crusade: What are banks doing with the cash from quantitative easing?

Cash crusade: Where does money created via QE actually go?

Where are Millennials investing their money?

What is the cost of extreme weather?

When will the semiconductor shortage be resolved?

What should investors do after China’s increase in regulations?

2Q21 earnings: All about that base

How should investors view the recent Chinese equity sell-off?

Progress towards (substantial) progress

Should I be worried about another recession?

Millennials: unique challenges for younger investors

Navigating conversations with the next generation of wealth

Where is inflation heading?

What are the investment implications of rising global inflation?

What’s the Federal Reserve’s outlook for monetary policy?

What do higher wages mean for corporate profits?

Money Moves: Where are the U.S. equity opportunities and how are investors positioned?

How can I prepare for a market correction?

Why are Emerging Market equities underperforming during this year of the recovery?

Will job growth disappoint?

What has been going on with cryptocurrencies?

Which markets have further room to run in the year of the recovery?

Net zero: What opportunities arise from a carbon neutral world?

What do higher taxes mean for retirement outcomes?

Net zero: How can policymakers drive net zero carbon emissions?

Money Moves: How should investors be positioned within International equities, and where have dollars actually gone?

How might the American Jobs Plan impact the municipal bond market?

Net zero: How do we reach net zero carbon emissions?

Should “do-it-yourselfers” invest at all-time highs?

How can companies boost return on equity?

Are we in a commodity super-cycle?

What should investors expect from China’s economy this year?

How can I improve my expected rate of return?

Tax-loss harvesting in a low return world

Can international stocks provide a hedge against rising inflation?

What is going on with the “average” stock?

Should investors be concerned about a “Taper Tantrum” hurting EM?

How will the Fed’s decision on the Supplementary Leverage Ratio (SLR) impact markets?