A new business cycle has begun, a cause for optimism both for the economy and for asset returns. But the traditional “early cycle playbook” may not apply this time around given the exceptional nature of monetary easing and the sheer scale of fiscal support in response to the coronavirus recession.
In the past, cyclical stocks have been highly correlated with value stocks. But from the market’s March lows, cyclicals have recovered sharply vs. defensives, while value has struggled against growth.
A sustained rotation into value stocks would require higher U.S. government bond yields, reflecting greater confidence in economic growth, and brightening the outlook for banks – a key value sector. In the first instance, however, faltering performance by the technology sector could also begin to narrow the gap between growth and value.
We continue to take a diversified, pro-risk position in our portfolios. We overweight equities and credit, mildly underweight duration and our portfolios will benefit from a weaker dollar. If tail risks play out in the fourth quarter and lead to market choppiness, we would be inclined to add risk in periods of weakness.
Welcome to our first Monthly Strategy Report. These monthly notes, which replace our Weekly Strategy Reports, will cover key research themes and prevailing market issues, highlighting how these topics are reflected in our multi-asset portfolios.
The tick chart and views expressed in this note reflect the information and data available up to September 28, 2020.
EXHIBIT 1: MAS ASSET CLASS VIEWS FROM SEPT STRATEGY SUMMIT
There’s growth to be found when you know where to look. With access to the entirety of J.P. Morgan’s global investment platform, the Fund searches worldwide to maximize total return, while also managing risk.
Using a multi-asset, flexible approach that seeks only the best income opportunities from around the globe, our Income Builder Fund aims to provide investors with a consistent and attractive income stream.
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.
The value of investments and the income from them can fall as well as rise and investors may not get back the full amount invested. Past performance is not a guide to the future.