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 1Q 2018 Guide to the Markets, containing our analysis of economic and market data through December 31, 2017. Below you will find key slides that we believe are the most relevant to liquidity investors.

U.S. investors generally had an excellent year in 2017.  Equity indices reached record highs, and benchmark credit spreads tightened to near pre-financial crisis levels.  Cash investors are seeing generic net yields on prime and government money market funds at approximately 1.40% and 1.10%, respectively, the highest levels since 2008. 

As 2018 begins, we see continued synchronized global growth and easy financial conditions, along with a burst of fiscal stimulus from the recently passed U.S. tax overhaul. On the other hand, the U.S. expansion is in its ninth year and asset valuations are at the higher end of their historical range.  Moreover, global central banks will be joining the Federal Reserve in tightening monetary policy at some point in the foreseeable future. 

The 1Q 2018 Guide to the Markets presents insights into these issues for the New Year and beyond:

  • Outside of the Federal Reserve, global central banks enter 2018 supporting global growth with monetary policy (pages 39, 47, and 48).
  • Fed normalization will eventually slow the pace of U.S. economic growth.  However, the new tax plan should provide a near-term, albeit partial, offset (pages 31, 32, 23, 8, and 22).
  • In a rising rate environment, as short-term fixed income investors we remain cautious on duration and are limiting our maturities of government bond holdings.  At the same time, we believe credit fundamentals are still attractive, and we are buyers of corporate risk.  However, as we acknowledge tighter valuations and flatter yield curves than in years past, we are maintaining discipline on spread risk (pages 36, 34, and 46).

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.