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What are P/E ratios implying for the markets - Chart of the week

Stocks are likely to get more expensive, but not because investors are bidding them up. This chart juxtaposes the forward P/E ratios with the implied earnings trend from that forward P/E, and shows that forward P/Es are rising—not because prices are rising, but because earnings are falling. This is due, in part, to the impact of falling oil prices and the rising U.S. dollar.
 
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Is the ECB’s QE too late? - Chart of the week

In the game of quantitative easing (QE), there are costs to being late. With eurozone inflation and yields at extremely low levels, this chart from the Market Insights team shows that the European Central Bank’s (ECB) latest QE move is coming late in the QE game.

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When will the Fed raise rates? Look at wages and job gains - Chart of the week

Despite a strong employment report, wage growth, which tends to have an inverse relationship with the unemployment rate, declined in December. This chart shows that investors should pay close attention to both job gains and wage growth for any developments that might change the Fed’s timeframe for raising rates.
 
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Investing across inflationary environments - Chart of the week

This chart breaks up inflation regimes into four scenarios and shows how different asset classes perform in each environment.
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Should investors fear a rising dollar? - Chart of the week

By Stephanie Flanders
Traditionally, a rising greenback has hurt emerging markets and helped developed markets. But these are not normal times for markets and monetary policies. This chart illustrates some investment considerations to the U.S. "dollar smile."
 
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Signs of pickup in eurozone lending - Chart of the week

As the eurozone struggles amid weak growth and a decline in inflation, this chart shows that there are signs of green shoots in the financial system.
 
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Putting volatility in perspective - Chart of the week

After the recent bout of volatility, it is worth remembering to take the long view. Not only is it normal for markets to experience intra-year drawdowns, but markets also typically recover and end the year in positive territory.
 
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Buying bonds in a rising rate environment - Chart of the week

By Dr. David Kelly
This chart, which depicts fixed income returns by breaking down total returns into three key components, highlights potentially attractive opportunities in a rising rate environment.
 
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Investing for the long-term: Consider a barbell approach - Chart of the week

By Michael Cembalest
Investors should consider a “barbell” approach when thinking about rebalancing in 2015 and beyond.
 
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What happens when the Fed starts raising rates? - Chart of the week

By Michael Cembalest
The prospect of Fed tightening shouldn't create an a priori change for long-term investors' equity investment strategies.
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Why the Fed may be tightening sooner than expected - Chart of the week

Current labor and market indicators appear to be tightening faster that Fed expectations, suggesting that a rate hike is more likely in the first half of 2015.
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Tracking the business cycle

By Michael Hood

Economic cycles play a key role in driving capital market outcomes and why a tilt toward growth-sensitive assets is still warranted. This paper examines past and current business cycles, outlines the current stages of the U.S., UK and the euro area cycles, and looks at the relationship between business cycles and financial market performance.

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Are widening high yield spreads cause for concern? - Chart of the week

By Michael Hood
This chart shows that HY spreads have widened much more than IG spreads in July. This is more likely an anomaly with spread narrowing expected in the near term.
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Is volatility anomalous? - The Global View

By Michael Hood

In this commentary, Michael Hood, Global Markets Strategist, reviews how Volatility in many financial markets, both implied and realized, has run at low levels during the past year and discusses the implications for investors.

Key highlights include:

  • Low implied and realized market volatility has attracted considerable attention
  • Rather than representing an anomaly, muted market volatility reflects the economy’s cyclical position and moderate macro volatility
  • Impending interest-rate hikes need not cause a lasting volatility surge
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Central bank outlooks start to diverge - The Global View

By Michael Hood
After the financial crisis developed market central banks adopted similar, highly accommodative monetary policies. In this commentary, Michael Hood, Global Markets Strategist, discusses how central bank policies have started to diverge as the global economy strengthens, and the implications for the currency and bond markets.
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The silver lining of higher volatility — Chart of the week

Sector dispersion in the S&P 500—which is highly correlated with the VIX—can create opportunities for active investors in periods of high volatility.
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Chart of the week: Are markets mispricing volatility?

By Michael Hood
With volatility across asset classes dropping to the lowest levels in years, have investors become too complacent?
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Chart of the week: Rethinking the growth vs. value debate

This chart shows why investors should consider the relationship between cyclical and defensive sectors in the growth vs. value debate.
 
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Chart of the week: Using international DM bonds to cushion Treasury positions

By Michael Hood
This chart shows how investors may help mitigate losses in their Treasury position by substituting it with international developed market (DM) government bonds.
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The Global View: A new conundrum

By Michael Hood

In this commentary, Michael Hood, Global Markets Strategist, discusses the unexpected performance of equity and bond yields after weak U.S. growth data in the early weeks of 2014 caused significant deviations in market performance. This "conundrum," he writes, defies easy explanation and most likely reflects a complex combination of circumstances, including:

  • Bond yields continue to defy expectations of further increases
  • Various explanations for rally in Treasuries appear unsatisfactory in isolation
  • Behind the scenes, a reevaluation of equilibrium yields
  • But yields look rich in the near term, and overweight positions in stocks versus bonds still make sense
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Chart of the week: Why international equities have room to rise

This chart compares earnings and valuation trends across the U.S., Europe and emerging markets (EMs) and shows that investors should consider EMs as the global economy continues to improve.
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The Global View: Monitoring the DM vs. EM story

By Michael Hood

In this commentary, Michael Hood, Global Markets Strategist, discusses growth in developed and emerging market economies so far in 2014 and outlines his projections for the rest of the year. Key highlights include:

  • DM and EM economies have suffered similar growth disappointments in early 2014
  • Evidence of renewed acceleration looks stronger in DM thus far
  • In addition to high-frequency activity indicators, EM inflation and policy rate trends merit close observation
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Chart of the week: The importance of manager alpha in mid-cycle years

By Michael Cembalest
This chart shows that manager alpha is likely to comprise of a larger portion of investors’ returns if markets return to more volatile, lower beta, single-digit gains in 2014.
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Chart of the week: Re-drawing the fixed income borders

This chart examines the evolution and composition of the global bond market and shows that there are pockets of opportunities as long as investors employ a targeted and active management approach.
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Chart of the week: In a low-rate regime, consider other assets

This chart from the 2Q Guide to the Markets compares the nominal and real 10-year Treasury yields from 1958 through March 2014, and shows why investors would be well served to consider additional categories for fixed income and other asset classes.
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Chart of the week: What happens to equities when interest rates rise?

This chart from the 2Q Guide to the Markets shows that stock prices and Treasury yields tend to rise and fall in tandem in a low
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The Global View: Weighing the risks

By Michael Hood

In this commentary, Michael Hood, Global Markets Strategist, discusses four risks confronted by markets in the first quarter, including surprising weakness in U.S. growth, the outlook for Fed policy, worries about the Chinese business cycle, and tensions surrounding the Russia/Ukraine conflict. Specifically, he believes that:

  • Investors have confronted a shifting constellation of risks thus far in 2014
  • Some prominent risks of recent months are likely to fade soon, while others will linger
  • Especially in developed markets, underlying trends do not appear to have shifted much...
  • ...though new concerns could crop up outside the U.S. in coming months
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Chart of the week: Why Europe deserves a close look

This chart shows why Europe, which is experiencing a broad-based improvement in economic growth, deserves a close look.
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Chart of the week: Is it too late to buy into the European rebound?

This chart shows how there is still room for further gains in European equities as investors initiate or add to positions that they had largely eliminated in recent years.
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The Global View: Back to the starting line

By Michael Hood

In this commentary, Michael Hood, Global Markets Strategist, discusses why events so far in 2014 have not significantly altered his medium-term economic outlook. Instead, new data has created a more nuanced story for 2014, specifically:

  • Equities and credit spreads have made back their early-2014 losses
  • Overall economic outlook has not changed, though a few nuances have been added to the view
  • Fed not on cruise control but unlikely to change course in the near term
  • Dollar less of a risk-aversion play, more linked to rate differentials
  • Equities still look relatively cheap, and earnings performing well; credit spreads have room to tighten but duration risk looms
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Chart of the week: Bonds regain their sensitivity to the economy

By Michael Hood
This chart shows how Treasury yields have begun to move in line with economic fluctuations, signaling that bond yields could move higher over the year.
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The Global View: Lessons from inflation trends

By Michael Hood
In this commentary, Global Markets Strategist Michael Hood discusses the implications of current inflation trends in developed markets, including the U.S., euro area and Japan, and emerging market economies.
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Chart of the week: Emerging markets contagion: Opportunity or crisis?

This chart shows how the contagion in emerging markets can create opportunities for investors who can distinguish between good and bad investments.
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Chart of the week: Why stocks still have years, not months, left to run

This chart shows how the U.S. stock market could still post double-digit returns in 2014 as investors gain confidence in economic growth and their fears of “tail risks” start to fade.
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The Global View: Will supply respond?

By Michael Hood
In this commentary, Global Markets Strategist Michael Hood discusses how the U.S. growth will likely accelerate in 2014 as last year's burden of fiscal austerity lifts and the private sector turns more expansionary.
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Chart of the week: Why global growth will pick up in 2014

This chart shows that there are a rising number of countries in expansion mode, an early indicator that growth will pick up in 2014.
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The Global View: Stumbling into 2014

By Michael Hood
In this commentary, Global Markets Strategist Michael Hood discusses how markets have moved opposite to our expectations so far in 2014. For now, he says, there is no reason to change our overall views.
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What is Market Views?
J.P. Morgan's Insights on key economic and market trends from our global market strategists.   

Our Global Strategists
Michael Cembalest
Chairman of Market and Investment Strategy
Dr. David Kelly
Chief Global Strategist and Head of Global Market Insights Strategy
James Liu
Global Markets Strategist

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Tracking the business cycle

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