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 4Q 2017 Guide to the Markets, containing our analysis of economic and market data through September 30, 2017. Below you will find key slides that we believe are the most relevant to liquidity investors.

With three rate hikes by the Federal Reserve (Fed) in less than 12 months and strong credit markets, cash investors are experiencing the highest returns in the liquidity markets since the global financial crisis. We believe this trend of strong returns will continue as the Fed begins to shrink its balance sheet, which it announced will start in October, and as it likely raises rates in December. Foreign central banks are also turning less dovish in response to stronger global growth, which will help global cash returns eventually over time.

As the Fed unwinds monetary stimulus, U.S. fiscal policy is likely to turn more expansionary via tax cuts, if not tax reform, sometime in 2018. We expect that as the U.S. economy moves from monetary to fiscal stimulus, the expansion will continue, thereby supporting risk assets. Globally, worries about European bank balance sheets, political extremism and global deflation are abating and now giving way to concerns about North Korea, terrorism, weather, and market imbalances.

The 4Q 2017 Guide to the Markets explores these issues, along with some of the key questions for the second half of the year and beyond:
  • Why isn’t inflation stronger—and could low inflation stall monetary tightening? (pages 17, 26, 27, and 29)
  • What can we expect of the handover from monetary to fiscal stimulus? (pages 22, 30, and 45)
  • Why has volatility been so low—and could it increase amid geopolitical tensions, natural disasters and financial imbalances? (pages 13, 44, and 54)

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.