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

Guide to the Markets

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We are pleased to present J.P. Morgan Asset Management’s 2Q 2018 Guide to the Markets, containing our analysis of economic and market data through March 31, 2018. Below you will find key slides that we believe are the most relevant to liquidity investors.

After a long absence, volatility returned to the markets in Q1 2018. Despite a strong U.S. corporate earnings outlook for 2018 supported by sweeping tax cuts Congress passed three months ago, a robust global macroeconomic picture and a weaker dollar, the quarter saw a significant sell-off in equities. In U.S. fixed income markets, interest rates rose and spreads widened, pressured by a combination of continuing, gradual Federal Reserve (Fed) tightening; an increase in government bond supply from fiscal stimulus; and U.S. multinationals selling corporate bond holdings to repatriate their offshore dollars. Markets also reacted nervously to heightened talk of a global trade war.

The Fed’s monetary policy decisions are the main drivers of yields in the liquidity investing market. Looking ahead, we see an increased likelihood of higher market volatility, but we do not believe it would tighten financial conditions enough to slow the Fed’s interest rate path. We still expect two or three additional fed funds hikes of 25 basis points each in 2018, a view supported by signs of higher wage growth and consumer inflation, buoyant consumer and business optimism and tight labor markets. Therefore, we continue to anticipate rising yields in the liquidity investing space over the rest of the year.

The 2Q 2018 Guide to the Markets presents insights into these topics for the quarter and beyond:

  • Global growth and inflation dynamics (pages 48 and 49)
  • Fiscal policy and monetary policy (pages 24, 32 and 33)
  • Earnings, volatility, and risk crashes (pages 7, 12 and 15)

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