On the Minds of Investors | J.P. Morgan Asset Management

How should current conditions be reflected in asset allocation?

The global economy appears to be in the early innings of recovery, while simultaneously staring down the limitations to growth in a pre-vaccine world.

We had a recession, now what about the recovery?

Last week’s GDP report showed that the U.S. economy contracted at a real, annualized rate of -32.9% in 2Q20.

How do we track the gradual recovery?

The U.S. economy contracted at its fastest pace on record in the second quarter, reflecting the nationwide lockdown and halt in economic activity.

Framing: How do investors interpret equity market returns over time?

Coming into 2020 – against a backdrop of steady and stable economic growth, along with a positive earnings outlook – many investors were worried about the market highs reached over the last few years.

2Q20 Earnings: Guide me to your profits

The second quarter saw one of the fastest stock market rebounds in history.

Is the EU Recovery fund a game changer for investing in Europe?

Over the past ten years, European equities have underperformed the U.S. by 174% pts in U.S. dollar terms.

Is the U.S. recession over?

The Business Cycle Dating Committee marked the peak month of the previous expansion in February 2020, officially marking an end to the longest expansion on record.

Is China’s recession really over?

China’s imposition of a strict quarantine in response to the COVID-19 pandemic plunged its economy into a deep contraction in the first quarter of 2020, -6.8% year-over-year, its first negative GDP print in over 40 years.

How disinflationary will prices be in the short term?

The dramatic increase in federal debt and the expansion of monetary policy has many investors wondering if a surge in inflation is on the horizon.

Should I be worried about a double-dip recession?

May and June saw economic activity improve relative to the April lows, and we expect that economic growth will be positive in the back half of the year.

Will fatalities spike again as COVID-19 cases rise, and what could that mean for markets?

After crushing the curve in the U.S., cases of COVID-19 have begun to rise rapidly again, with the resurgence occurring in new hotspots.

Why should investors consider Sustainable Investing?

Due to COVID-19 and the discussions around social issues and climate change, Sustainable Investing (SI) is more relevant today than ever before.

What does a second wave mean for equity markets?

The past few weeks have seen COVID-19 case growth accelerate in parts of the United States, with the total number of confirmed cases now well above 2.5 million.

What is the outlook for the U.S. dollar?

Since the start of the year, the U.S. dollar has appreciated by roughly 1%, continuing a near-decade long trend that was only briefly interrupted in 2017.

When it comes to fixed income, do you like high yield?

One of the best trades to put on in the aftermath of the financial crisis was going long high yield. Spreads blew out to nearly 18% in November 2008, implying a default rate of almost 30%. Looking back, this is far from what actually materialized, as default rates on U.S. high yield peaked at a level of 11% in November of the following year. With the Federal Reserve (Fed) becoming increasingly active in credit markets, we have been getting more and more questions on the outlook for high yield; the bottom line is that while valuations are not terribly compelling, the near-term path for credit spreads may be tighter.

Will investing in European equities ever pay off?

Over the past 15 years, investors have been frustrated with the performance of European equities.

When will we finally see a market correction?

At the end of last week, it looked like the equity market pullback that everyone had been expecting was finally beginning to materialize.

How will the Fed’s forward guidance impact bond investors?

The Federal Open Market Committee (FOMC) met this week and provided investors with a fresh set of economic and interest rate projections after a six month hiatus.

What’s going on with stock market sentiment?

While fundamentals– valuations, earnings and economic growth – dominate in the long run, the short run is a different matter.

Have markets recovered from the COVID-19 recession?

Investors have had to process a torrent of information and wild swings in sentiment so far this year.

Should I expect a market correction?

The S&P 500 has marched steadily higher from its March 23rd low against a backdrop of investor skepticism. In previous posts, we have discussed how this rally is being driven by three things.

Will the Fed cause inflation?

The balance sheet of the U.S. Federal Reserve (Fed) has increased by 2.9 trillion USD since the start of March, meaning that in just over eleven weeks it has grown more than it did in the five years following the Financial Crisis.

How will COVID-19 affect Sustainable Bonds?

Global governments have been swift and bold in supporting their economies, building a bridge to get consumers, small businesses and corporates over the present abyss to the other side. Given the unknown breadth and depth of the abyss, more stimulus may be required.

Has all EM behaved the same way this year?

Year-to-date, emerging market (EM) equities are down -17.6%, as a combination of the COVID-19 recession and the oil price shock has led to downward revisions to earnings expectations, as well as weaker currencies relative to the U.S. dollar.

Has the Fed done enough?

Ultimately, the Fed’s next step will be dictated by the pathway of the virus, says Dryden.

Should I go to the equity market for income?

Investors looking to the equity market for income should focus on sectors with healthy balance sheets and minimal exposure to the COVID downturn, says Lebovitz.

What opportunities were created by the COVID-19 earthquake?

During the first three weeks of March, investors stampeded out of riskier markets and rushed to safe assets. In the process, 100 billion USD flowed out of emerging market (EM) stocks and bonds –more than three times the outflows seen during each of the previous three risk-off periods.

What is going on with earnings?

The first quarter earnings season, thus far, can be helpful in building expectations for how things may evolve during the rest of the year, says Lebovitz.

Is now the time to invest in small cap stocks?

Global markets have roiled in the face of COVID-19 and social distancing, and many investors are looking to “pick up the pieces,” eagerly hunting for the next big opportunity.

What does post-COVID leverage mean for investing?

While many changes are likely to emerge, one clear trend, with far-reaching macro and market implications, is the increase in leverage, says Azzarello.

Why are oil prices negative?

Earlier this week, oil prices turned negative for the first time in history, with WTI trading as low as -$37 a barrel.

What will the reopening of the economy look like?

Over the past two months investors have digested the COVID-19 shock: the fast spread of the virus around the world, the social distancing measures implemented and the resulting economic and earnings recession.

1Q20 earnings: Virus oddity

1Q20 earnings season will provide an important first look at how the ongoing pause in global activity is impacting corporate earnings.

What does COVID-19 mean for real estate?

The industries most impacted by social distancing account for 20% of payroll employment, and consumer spending across those industries account for 20% of GDP.

How will stocks rebound from COVID-19?

With the equity market having hit its last new high on February 19th of this year, the depth and speed of the market drop has been ferocious.

What are the risks and opportunities in high yield?

Today’s objectively complicated credit market may be an excellent source of future portfolio growth, says Dryden.

Who's buying and who's selling?

The recent U.S. equity market drop and subsequent swings in prices have been dramatic.

Will American small business fire its workers?

Ultimately, how high the unemployment rate gets is dependent on one key question: will American small business fire its workers, says Manley.

A COVID-driven spike in claims

Initial claims for unemployment insurance surged to the highest level ever: 3,283,000, spiking from a slightly revised 282,000 last week.

The COVID-19 Relief Bill-Holding the Economy in Suspended Animation

This paper, written by Dr. David Kelly, reviews the U.S> relief bill and its investment implications.

What is the Fed doing and what does it mean for fixed income?

The U.S. Federal Reserve (Fed) has pulled out its alphabet bazooka in an effort to ensure sufficient liquidity and the smooth functioning of financial markets, while also providing credit to businesses that are affected by the spread of COVID-19 and the stall in global economic activity.

What will an earnings recession look like?

As economists continue to revise down their 2020 GDP estimates, a lot of clients have been asking us about the potential impact on earnings.

Can the Fed do more?

This past Sunday, the U.S. Federal Reserve (Fed) fired a last desperate salvo in an attempt to stabilize financial conditions, the second emergency inter-meeting cut in two weeks.

What policy response would help to stabilize markets?

Coming into this year, we expected an improvement in global economic growth, as 2019’s policy uncertainty clouds dissipated.

The investment implications of COVID-19: An update

The COVID-19 crisis confirms, once again, the value of a diversified portfolio, says David Kelly.

What does the latest oil price collapse mean for investors?

It is important to avoid trying to predict the future; rather, clients are best served by monitoring the present situation and maintaining composure.

Should I buy the dip?

There is not a clear answer. However, what we can provide perspective on, is where we are finding value, according to David Lebovitz.

How does Super Tuesday affect the election campaign ahead?

Former Vice President Joe Biden made a surprise comeback during the Super Tuesday contests, paving the way for a two-person race to the Democratic nomination.

Monetary medicine of limited effectiveness

Even with this Fed action, there will likely be calls for fiscal action to support to businesses suffering from the response to virus fears, says David Kelly.

Should I be concerned about the correction in U.S. equities?

Sentiment, and valuations, are likely to keep markets relatively contained until there is clarity about the extent and length of the outbreak, says Tyler Voigt.

What do you like more, value or growth?

Equity investors spend a lot time looking for where earnings growth will be strong; what doesn't get as much attention is what happens after they're generated.

Should investors worry about the jobs market?

Taken at face value, the fall in job openings is concerning and warrants careful monitoring.

How sustainable is the interest in sustainable investing?

AUM growth and focus by investors globally suggest interest and adoption of sustainable investing is unlikely to subside anytime soon, says Samantha Azzarello.

What does the coronavirus mean for investors?

Financial markets have fallen sharply on concerns of the coronavirus, a respiratory illness first identified in Wuhan, China, spreading globally.

What is priced in to equity markets?

Equity market valuations have risen substantially in recent months, with the forward P/E ratio of the S&P 500 now at a level of 18.6x.

Should investors worry about inflation?

Investors are now asking whether inflation could return, threatening the rally in financial markets.

Should I wait to buy the dip?

Buying the dip - the coveted strategy (almost) all investors like to employ.

Will tensions with Iran cause an oil spike?

Rising geopolitical tensions with Iran have led to some fears over potential oil supply shocks out of the Middle East.

Why should I stay invested?

Rising geopolitical tensions with Iran have led to some fears over potential oil supply shocks out of the Middle East.

Funds

Solutions

Liquidity Insights

Market Insights

Portfolio Insights

Dr. David Kelly

Samantha Azzarello

Alex Dryden

David Lebovitz

Jack Manley

Gabriela Santos

Dr. David Kelly

Samantha Azzarello

Alex Dryden

David Lebovitz

Jack Manley

Gabriela Santos

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LATEST COMMENTARY

How should current conditions be reflected in asset allocation?

We had a recession, now what about the recovery?

How do we track the gradual recovery?

Framing: How do investors interpret equity market returns over time?

2Q20 Earnings: Guide me to your profits

Is the EU Recovery fund a game changer for investing in Europe?

Is the U.S. recession over?

Is China’s recession really over?

How disinflationary will prices be in the short term?

Should I be worried about a double-dip recession?

Will fatalities spike again as COVID-19 cases rise, and what could that mean for markets?

Why should investors consider Sustainable Investing?

What does a second wave mean for equity markets?

What is the outlook for the U.S. dollar?

When it comes to fixed income, do you like high yield?

Will investing in European equities ever pay off?

When will we finally see a market correction?

How will the Fed’s forward guidance impact bond investors?

What’s going on with stock market sentiment?

Have markets recovered from the COVID-19 recession?

Should I expect a market correction?

Will the Fed cause inflation?

How will COVID-19 affect Sustainable Bonds?

Has all EM behaved the same way this year?

Has the Fed done enough?

Should I go to the equity market for income?

What opportunities were created by the COVID-19 earthquake?

What is going on with earnings?

Is now the time to invest in small cap stocks?

What does post-COVID leverage mean for investing?

Why are oil prices negative?

What will the reopening of the economy look like?

1Q20 earnings: Virus oddity

What does COVID-19 mean for real estate?

How will stocks rebound from COVID-19?

What are the risks and opportunities in high yield?

Who's buying and who's selling?

Will American small business fire its workers?

A COVID-driven spike in claims

The COVID-19 Relief Bill-Holding the Economy in Suspended Animation

What is the Fed doing and what does it mean for fixed income?

What will an earnings recession look like?

Can the Fed do more?

What policy response would help to stabilize markets?

The investment implications of COVID-19: An update

What does the latest oil price collapse mean for investors?

Should I buy the dip?

How does Super Tuesday affect the election campaign ahead?

Monetary medicine of limited effectiveness

Should I be concerned about the correction in U.S. equities?

What do you like more, value or growth?

Should investors worry about the jobs market?

How sustainable is the interest in sustainable investing?

What does the coronavirus mean for investors?

What is priced in to equity markets?

Should investors worry about inflation?

Should I wait to buy the dip?

Will tensions with Iran cause an oil spike?

Why should I stay invested?

Dr. David Kelly

Samantha Azzarello

Alex Dryden

David Lebovitz

Jack Manley

Gabriela Santos

Dr. David Kelly

Samantha Azzarello

Alex Dryden

David Lebovitz

Jack Manley

Gabriela Santos