The Weekly Strategy Report (May 21, 2018) - J.P. Morgan Asset Management

The Weekly Strategy Report (May 21, 2018)

In brief
  • As yield curves flattened globally over the last few years, warnings have increased proportionately that a flat yield curve foretells economic recession.
  • While the yield curve in general is a powerful indicator, it is an inverted curve rather than a flattening curve that provides a powerful signal to de-risk. Yield curve flattening, a natural by-product of a rate hiking cycle, is common in the later stages of the business cycle.
  • Yield curves have been distorted by quantitative easing (QE) and have been flatter than pure macro factors would predict, reducing but not eliminating the signalling power of the curve.
  • Within our base case view of above trend growth in major developed markets and normalizing inflation, we see low risk that the yield curve inverts this year. As such, we maintain a moderately positive stock-bond view, with our preferred equity regions the U.S., emerging markets and Japan.

Source: Bloomberg, J.P. Morgan Asset Management Multi-Asset Solutions; data as of May 17, 2018. For illustrative purposes only.

Weekly Strategy Report (May 21, 2018)

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Please be aware that this material is for information purposes only. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are, unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. JPMorgan Asset Management Marketing Limited accepts no legal responsibility or liability for any matter or opinion expressed in this material.

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