All into Account

All into Account: Technical Strategy – Sharp risk-off seems to be more position-driven and technical than fundamental at this point

Jason Hunter discusses the sharp July trends across fixed income, currency, equity, and commodity markets. While they look more technical and position-driven at the moment, the late-cycle signals coming from cross-market relationships and lower-frequency pattern development suggests the summer shifts can mark the start of something more durable.
 
Speakers:
Jason Hunter, Head of Technical Strategy
 
This podcast was recorded on 25 July 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at 
https://www.jpmm.com/research/content/GPS-4742587-0, https://www.jpmm.com/research/content/GPS-4753546-0, https://www.jpmm.com/research/content/GPS-4734633-0, https://www.jpmm.com/research/content/GPS-4745567-0, https://www.jpmm.com/research/content/GPS-4745703-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

Equity Strategy: July Chartbook

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
SPW, an equal-weighted S&P500 index, has stalled since March, and is behind SPX so far this year by more than 10%. We think this is reflecting a changing Growth-Policy narrative vs early 2024. Entering this year, investor expectations were for a Goldilocks outcome – growth acceleration and at the same time quick Fed easing, starting already in March. The early Fed cuts and the consequent improving credit impulse didn’t materialize, which should weigh on growth in 2H. US activity momentum is slowing, with CESI outright negative at present, putting EPS growth projections of as much as 15% acceleration between Q1 and Q4 of this year at risk. Instead of easing preemptively for market-friendly reasons, such as falling inflation, as was the view at the start of the year, the Fed could end up easing, but reactively, in a response to weakening growth. At the same time, there is no safety net any more, the market is positioned long, Vix is at lows, potentially underpricing risks and credit spreads are extremely tight – this is as good as it gets. Adding to the picture strengthening USD and elevated political uncertainty currently, we arrive at a problematic setup for the equity market during summer. In terms of positioning, we have entered this year again OW Growth vs Value style and Large vs Small caps, and we are keeping these for 2H in the US, not expecting much broadening. The recent relative dip due to French political uncertainty is likely to become a buying opportunity as we move through 2H, but we think the risk of further drawdowns is not finished, as the potential new French government will likely try to test the limits of what they can do.
This podcast was recorded on 30 June 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-GPS-4735603-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

Equity Strategy: When will Eurozone equities be able to move on?

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
After meaningfully lagging the US in 2nd half of last year, Eurozone equities showed some relative stabilization in Q1/Q2, before breaking lower most recently on a spike in French political uncertainty. We have closed the UW on Eurozone vs the US in Q1, driven by the improving Growth - Policy tradeoff in the region, but we believed that it was too early to expect Eurozone to move to an OW vs the US. Now, should one use the current dip to go long? On the positive side, Eurozone CESI is significantly above US one. At the same time, ECB has started easing, while Fed could stay higher for longer, and Eurozone valuations relative to the US are as cheap currently as at the extremes of TMT sell-off, GFC and Euro peripheral crises. Having said that, Eurozone equities are not showing oversold extremes. In fact, on equal weighted basis, Eurozone stocks were trading above US in Q2, and that is still the case, even fully taking into account the French driven weakness. The key will be any improving visibility with respect to the political backdrop. Here, we do not see the current French risks as a game changer for the region. The institutional setup is much more robust than during initial Euro crises. While the snap elections offer increased near term risks, they might be reducing longer term ones, and French government bond spreads to Germany are up 30bp, only higher during 2011 extremes. Now, we do fear that proverbially things might need to “get worse in order to get better”. The chances are that a potential new French government will likely try to test the boundaries of what they can do. Financial markets might end up needing to push back against the more aggressive fiscal easing.  Given this, the risk of further drawdowns will likely not be elevated only between the two rounds of voting and in the immediate aftermath, but also for a while post elections. Overall, we think that, as we move through 2H, there is likely to be a good entry point to buy Eurozone, to go OW vs the US, but for now we stay on the sidelines given the elevated risk of further drawdowns and no capitulation visible. We keep our Defensive sector tilt, and stylewise, we keep OW Growth vs Value stance, believing that it will continue to build on 14% ytd performance in the US and 7% in Europe.
 
This podcast was recorded on 24 June 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4728003-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

All into Account: ‘French Elections update and the view on European Rates,’ with Raphael Brun-Aguerre, European Economist and Aditya Chordia, European Rates Strategist

Raphael joins us to provide an overview of the French political developments and their potential impact on the economy. Aditya provides an update of his scenarios for European rates markets and how to position for duration, as we consider whether this situation is idiosyncratic to France or broadening to other Euro sovereign spreads.
Speakers:Thomas Salopek, Head of Global Cross Asset StrategyRaphael Brun-Aguerre, European Economist Aditya Chordia, European Rates Strategist
This podcast was recorded on 21 June 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4730678-0, https://www.jpmm.com/research/content/GPS-4730510-0, https://www.jpmm.com/research/content/GPS-4725293-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2024 JPMorgan Chase & Co. All rights reserved.
 

Equity Strategy: Will the more Defensive sector performance, seen so far in Q2, have legs?

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
In contrast to Q1, when key bond proxy Defensive sectors – Utilities, Real Estate and Staples – were the three worst performers, Q2 has brought a change. QTD, these three sectors are in line in Europe, making a positive swing in performance of 10%. The worst performers so far this quarter are Autos, Travel & Leisure, Chemicals, Luxury and Construction Materials – all Cyclicals. Will this shift last? We believe it will, on further repricing of a range of tail risks, and reiterate our barbell of OW Defensives and Commodities. First, many Cyclical sectors, with some notable exceptions such as Chemicals, Commodities and Logistics, strongly outperformed Defensives last year, when PMIs were falling, so why should they now outperform again? Also, the valuations of Cyclicals, which were cheap at end 2022, have moved to the expensive side of fair value. Second, activity momentum is picking up in manufacturing and in Europe/China, the laggards from last year, but crucially US growth momentum is likely slowing into year-end. As US CESI has turned negative, Defensives could have the upper hand. Finally, bond yields are likely to be flat or move lower into year-end; we reiterate our call from last October that US 10-year yield has likely peaked at 5%. Now, in terms of styles, this should keep helping our OW on Growth vs Value, but should also support bond proxies. Looking at Defensive sectors, Healthcare as an index was up this year in Q1, and in Q2 it worked even ex NOVOB. We think this broadening should continue. Utilities see a pickup in CO2 and in gas prices, in addition to supportive EPS momentum. Staples do not have many fans, but are markedly cheaper currently than in 2022. On the negative side, we remain cautious on Consumer Discretionary – in particular on Autos and on Luxury; we are still UW Chemicals, even as we acknowledge that they already had a terrible 2023, and are again strongly behind ytd, by 1000bp in Europe; and we think that Banks are likely to keep rolling over.
 
This podcast was recorded on 17 June 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4724125-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

Equity Strategy: UK elections – we favour FTSE250 over FTSE100, also homebuilders and domestic plays

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
This podcast was recorded on 09 June 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4713514-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

All into Account: ‘View on Japan ahead of BoJ’ with Ayako Fujita, Chief Japan Economist and Takafumi Yamawaki, Chief Japan Rates Strategist

Looking ahead to next week’s BoJ monetary policy meeting, Fujita-san joins us to share her views of what to expect including the timing of QT, the rate hiking trajectory, terminal rates, and the inflation outlook. Yamawaki-san explains what’s been driving the move up in JGB yield post NIRP. With regard to the upcoming MPM, we see some upside for yields from here as the market is underpricing rate hikes relative to our view, and demand from Japanese lifers is blunted as they await better yield levels.
Speakers:Thomas Salopek, Head of Global Cross Asset StrategyAyako Fujita, Chief Japan Economist Takafumi Yamawaki, Chief Japan Rates Strategist
This podcast was recorded on 5 June 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4714146-0, https://www.jpmm.com/research/content/GPS-4711466-0, https://www.jpmm.com/research/content/GPS-4714651-0, for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

Equity Strategy: June Chartbook - Sticky inflation and moderating growth are not a great combination; Keep up Defensive rotation, seen so far in Q2, together with Commodities

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
Last couple of months are showing softening US growth momentum, but at the same time an increasing potential for higher for longer Fed. We see the market upside capped during summer due to the inconsistency between consensus call for disinflation on one hand, and the belief in no landing and in earnings acceleration on the other. Within the market there was a more Defensive rotation underway in Q2, compared to Q1. We think this will continue on likely peaking in bond yields and more attractive valuations. At sector level, we hold a barbell of Defensives and Commodities, and are in particular cautious on Consumer Cyclicals such as Autos and Travel & Leisure. Stylewise, our OW on Growth vs Value continued working – we are not changing it for now, but Small caps could trade better in 2H. They have again lagged ytd, in all key regions, are cheap, and typically perform better when policy cuts start in Europe. In addition, European activity already had a reset last year, and is likely to be better this year. For the US, the rotation might work also, but we do not see it as clear cut, as Fed could stay higher for longer, and US domestic growth could actually weaken meaningfully in 2H. We reverse our long-term preference for FTSE100 vs FTSE250.
This podcast was recorded on 02 June 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4715457-0.pdf  for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

All into Account: ‘US Credit: latest views on HG & HY’ with Eric Beinstein, Head of US Credit Strategy and Nelson Jantzen, Head of US High Yield and Leveraged Loan Strategy

Eric and Nelson join us to discuss their views on HG and HY. For HG, we review what’s driving the low volatility of credit spreads, whether credit investors becoming more defensive, and what would cause spreads to break out either way. For HY, we highlight our recent forecast revisions, our default rate assumptions, and how recent capital market activity is affecting spreads.
 
Speakers:
Thomas Salopek, Head of Global Cross Asset Strategy
Eric Beinstein, Head of US Credit Strategy
Nelson Jantzen, Head of US High Yield and Leveraged Loan Strategy
 
This podcast was recorded on 29 May 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at
https://www.jpmm.com/research/content/GPS-4713311-0, https://www.jpmm.com/research/content/GPS-4713437-0.pdf, and https://www.jpmm.com/research/content/GPS-4704000-0, for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

Equity Strategy: Sector and Style leadership ahead of rate cuts

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
In this report, we focus on two topics: first, at sector level on the Cyclicals vs Defensives performance into rate cuts and against the backdrop of falling bond yields, and at the style level on the performance of Large vs Small caps. Historically, Defensives and bond proxies struggled when bond yields would be moving higher. This phase might be ending. Especially if bond yields are falling as economic growth is moderating, the sector leadership is likely to be more Defensively tilted, as is the case so far in Q2. Additional considerations are: valuations – Cyclicals are generally trading stretched vs Defensives; past performance – the Cyclical run over the last 18 months has opened up a gap with PMIs, which has not closed yet; and finally the weaker recent earnings delivery of Cyclical vs Defensive sectors. We favour a barbell of Defensives and Commodities. With respect to Small vs Large caps style tilts, there is a typical pattern of weakness in Small caps into, and a rebound post, the start of central banks easing. This is visible for both the Eurozone and UK small caps. For the US Small vs Large caps, the weakness into the first Fed cut is seen too, but there was no imminent rebound, more a weaker performance for another six months or so, and only then a recovery. Additional consideration for small caps trade is likely the domestic economic backdrop. Here, European growth had a reset last year, and is looking sequentially better this year, while US was resilient last year, but could soften from here. Small caps have had two poor years everywhere, and are lagging again so far ytd, by 9% in the US, 4% in Eurozone, 2% in UK and 8% in Japan – the turn might be upon us, likely more in Europe than in the US, though, given less visibility over Fed start and softer forward activity momentum in the US.
This podcast was recorded on 27 May 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4117650-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.