All into Account

All into Account: Food insecurity: War, weather and the weaponization of food

In this podcast we discuss the recurrent food security crises, which bring new challenges as supply side shocks, geopolitical risks, climate change and biodiversity loss magnify vulnerabilities across the global food system. Moderate or severe food security now affect 30% of the global population, or 2.4bn people and food insecurity is the “new normal” with climate change and biodiversity loss pointing to recurrent crises.
Three shocks tilt food prices to the upside—the breakdown of the Black Sea Grain Initiative (BSGI), new rice export restrictions and El Niño. Countries are bracing for ongoing food insecurity through increased stockpiling, seeking alternative supply routes and maintaining restrictions on food and fertilizer exports, and a number of countries are also accumulating stocks of food in reserve as buffers. Africa and EMEA are most exposed to wheat and rice shortfalls, while LatAm food supply is most exposed to weather-related shocks on food prices from El Niño.
Speakers
Joyce Chang, Chair of Global Research
Nicolaie Alexandru, Head of EMEA EM Economics Research
Toshi Jain, India Economist
Vinicius Moreira, Brazil Economist
Natasha Kaneva, Head of the Global Commodities Strategy
Virginia Martin Heriz, Head of ESG Research Methodology and Integration
Amy Ho, Strategic Research
This podcast was recorded on September 6, 2023.
This communication is provided for information purposes only. Institutional clients please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Equity Strategy - September Chartbook: For how long will “bad” be interpreted as “good”? Stay OW Growth vs Value, keep fading Cyclicals, such as Autos and Industrials

Speaker - Mislav Matejka, CFA, Head of Global Equity Strategy
Divergences keep opening up between the resilient equity markets and softening dataflow. Manufacturing PMI recovery, that was the consensus call for months now, remains elusive, and there are signs of services weakening, as well. There is no regional convergence coming through, with Europe disappointing further, and China staying mixed. SX5E had gone nowhere for half a year now, and has lagged the US since May, coincident with our downgrade to UW, but the relative performance of SX5E vs bonds has opened up a big gap with IFO, worth 20%+. How will it close? Also, even as Cyclicals finally stalled somewhat in August, the gap with PMIs remains significant. In a sense, bad is so far still seen as good, but this could change if labour market and consumer dataflow starts disappointing. Bond yields look set to move lower in that scenario, which will keep supporting our OW Growth vs Value call that we had on this year, at least in relative terms, but the bond proxy sectors should be logically getting a bid, too. Cyclicals stalled in August, keep fading them, in particular Industrials and Autos.
This podcast was recorded on 03 September 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4502246-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Equity Strategy : Bond yields, China, PMIs and the market leadership

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
Month to date, in SXXP, Healthcare, Energy, Insurance, Staples and Utils are top sectors, a big change from earlier in the year, while the worst are Mining, Autos, Industrials, Travel & Leisure, Semis and Homebuilders. This reversal in leadership coincided with bond yields breaking out higher in August, from 4.0% to 4.30% for US 10 year. Can Defensives work if yields are going up, and should yields be going up in the first place? We think that bond yields’ move is to a good extent driven by inflation forwards moving up, US debt downgrade, and demand-supply worsening, and not just due to forecasters abandoning their recession calls. If the above remain the dominant drivers, then it is unlikely that high-beta stocks will benefit from this; i.e., bond yields might be rising for the “wrong reasons”. MSCI China made new ytd lows last week, down 20%+ from Jan high. This usually mattered for the broader Cyclicals complex, and not just for Miners. Lastly, Eurozone PMIs are meaningfully down since May, coinciding with our downgrade to UW. As we feared, the positive convergence, which was the consensus call over the past 3-4 months by forecasters, is not coming through, PMIs appear to be converging to the downside. Our lead indicators continue to point to no meaningful recovery in the near term. Despite recent Cyclicals stalling, the gap between PMIs and market internals, which we highlighted in our July Chartbook, is still significant. We do not see bond yields moving higher from here, at least not for the right reasons, China is likely staying under pressure, and PMIs are weakening. Put together, we think that Cyclicals can show another leg lower.
 
This podcast was recorded on 28 August 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at
https://www.jpmm.com/research/content/GPS-4498704-0  
for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.
 

Equity Strategy: Growth-Policy tradeoff is poor into year end; Defensives to catch a bid

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
Compared to the start of the year, clearly investor expectations, market positioning and the equity valuations have moved up. Recession projections have been erased, there is no more fear, only complacency. While positioning was rather cautious at the turn of the year, many indicators point to significant investor involvement currently. SPX P/E has moved from 17x in January to 19x forward at present. Even ex Tech, multiples have rerated. Relative to this optimism, it is not clear to us that the Growth-Policy tradeoff has materially improved. China continues to disappoint, we believe one should keep fading any stimulus-induced bounces, and Europe has also lost momentum, especially since May, coinciding with our downgrade. On the inflation/policy front, it is likely easier for inflation to move down from say 10% to 5%, but the move from 5% to 2% becomes incrementally harder. Central banks could stay higher for longer, which would limit any prospect for multiple expansion, and the market would then need to solely rely on earnings growth for upside. On earnings, we note that full-year EPS projections are not inflecting meaningfully higher, current PMIs are consistent with continued earnings downgrades. European equity indices have struggled to deliver gains for a while now. SX5E is currently at the same levels it held in February, it didn’t advance for 6 months. Despite this, we do not see any upside from here into year end, and we reiterate our year-end targets that we first unveiled last December, of 4150 for SX5E. This offers only marginal downside from current levels, but we think there is a good chance that equity markets move meaningfully below our year-end projections in the interim. In terms of key positioning, we were OW Growth vs Value this year, but the Tech run is becoming heavy, so we think that pure Defensives look the best into year end, in addition to the Energy sector.
 
This podcast was recorded on 20 August 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4493429-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

All Into Account: Cross Asset Strategy: ‘View on EM stocks given the China slowdown’ with Pedro Martins, Chief EM Equity strategist

Recent developments such as the spectre of property default, worsening exports, and disappointing TSF credit point to further slowing in China, and Chinese stocks must cheapen further before they become interesting again. Ex-China, EM stocks are still cheap and under-owned, with the current P/E discount much wider than the already wide historical discount.
Speakers:
Thomas Salopek, Global Cross Asset Strategy
Pedro Martins, Chief EM Equity strategist
This podcast was recorded on date.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4486467-0, www.jpmm.com/research/content/GPS-4486687-0, for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

All into Account: ‘Supply picture shifting for US Bonds’ with Jay Barry, Co-Head of US Rates Strategy

 
 
 
Speakers:
Thomas Salopek, Global Cross Asset Strategy
Jay Barry, Co-Head of US Rates Strategy
 
This podcast was recorded on 07 August 2023
This communication is provided for information purposes only. Institutional clients can view the related report https://www.jpmm.com/research/content/GPS-4479744-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: Q2 earnings hurdle rate is again too low, but upgrades are unlikely for 2H

Speaker: Mislav Matjeka, CFA, Head of Global Equity Strategy
Consensus projections for Q2 have been cut significantly over the past months, resulting in the -12% yoy EPS growth expectation for S&P500, and -17% for SXXP. Ex commodities, this improves, and median EPS growth projections are around zero. At the same time, Q2 activity was overall robust, with global PMIs in expansion territory, and consistent with sequential EPS growth. Put together, the unassuming hurdle rate, coupled with activity which held up well during the quarter, is pointing to beats. Having said that, the stock price reactions in general could be more muted than in Q1, or at least any positive momentum might not have legs. Ahead of Q1, sentiment and positioning were cautious, but the equity market was strong coming into Q2 reporting season, suggesting buyside expectations are more elevated, even as analyst projections are subdued. Also, the question is whether the guidances will be raised on the back of quarterly beats, as there was some loss of momentum as we moved through the quarter, and China dataflow continues to disappoint. Out of early reports, with 70 S&P500 results and 90 in Europe, the majority are beating the consensus projections, but the stock price reaction to the beats is worse than typical. For the full year 2023, the S&P500 EPS growth rate currently stands at -1.0%, down from 3.2% in January, and SXXP at ‒0.4%, down from 1.6%. The full year projections are not overly conservative, even with these near zero growth rates assumed, as 2H earnings are expected to bounce 8% vs 1H levels. If in 2H the PMI momentum loses steam further, China activity stays disappointing, and pricing power erodes, all of which we subscribe to, and the lead indicators are pointing to, then EPS growth projections are set to move further down, with EPS revisions bound to spend time largely in negative territory.
This podcast was recorded on 23 July 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4467241-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

All into Account: The great supply chain disruption: ASEAN’s rise, India’s potential, USMCA and Chino-Latino flows

Tune into our latest podcast on J.P. Morgan Research’s All into Account channel where we discuss why “de-coupling” is neither possible nor desirable but see new trade corridors emerging as supply chains are disrupted, commodity markets reshaped and industrial policy on the rise. We highlight the themes transforming the supply chain, examining the shift in traditional trading patterns and capital flows, and the regional implications. ASEAN and northern Asian countries are benefiting the most from shifts in global value chains, while Latin America is also well-positioned to benefit from friend- and near-shoring with the US and there’s long-term potential and incentives for supply chains to relocate to India. Russia-Ukraine war has permanently reshaped China-Russia trade and global commodities markets with diversification of currencies used to settle commodity trades, though de-dollarization fears are overstated.
Speakers:Joyce Chang, Chair of Global Research Sin Beng Ong, Chief ASEAN Economist Sajjid Chinoy, Chief India EconomistGabriel Lozano, Chief Mexico & Central America EconomistHaibin Zhu, Chief China EconomistNatasha Kaneva, Head of Global Commodities StrategyAlexander Wise, Strategic Research
This podcast was recorded on July 18, 2023.
This communication is provided for information purposes only. Institutional clients please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: The UW on Eurozone vs the US to have a next leg; Stay cautious on China, keep fading stimulus news

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
Since the relative high in May to early last week, Eurozone has lost 12% vs the US, in USD terms, and is trying to bounce. We believe there is another leg of underperformance ahead, and reiterate our moving the region to UW two months ago. This was partly given our view that Eurozone activity momentum was about to roll over. Indeed, post the last two months of poor PMIs and other subdued data prints in Eurozone, its CESI is very weak currently, near the typical lows of the range. This could call for some short-term stabilization, but our view is that the Growth-Policy tradeoff in the region is likely to get worse through 2H. The gap between the performance of Eurozone/US equities and Value/Growth style has closed, but the next leg down could be driven by a move lower in bond yields, as well as the earnings disappointments coming up. Earnings and PMIs have a clear link, with downgrades likely at these levels of PMIs. What is at risk in Eurozone? The highest correlation with PMIs is usually seen among Autos and Banks. Banks could still have good numbers in Q2, as NII likely peaks towards the end of the year. We would use any strength on the back of positive results to reduce into. We stay cautious on Chemicals and Mining, despite an already meaningful chunk of underperformance. Capital Goods have been very strong in 1H, but could start to see weakness, as they typically trade with IP momentum. Finally, Semiconductors have near record inventory, many have been outperforming as a play on the AI theme, but the benefit is likely only marginal. The above outcome could be reinforced by any potential further disappointments in China. Now, as MSCI China was already down 20%+ from January highs to the recent low, the stimulus announcements, where the hopes are increasing, could result in bounces, but we advise using these pockets of strength to reduce further. The region is sliding back into deflation and the property market will likely need a much more aggressive policy support to rebound sustainably, given past excesses.
This podcast was recorded on 20 October 2022.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4461310-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: What is the market ex Tech/AI pricing in?

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
 
Our AI basket is up 42% relative to S&P500 this year, SPX over SPW dispersion is at a meaningful 10%, and with Tech sector a standout outperformer, up 25% relative, there is a view among many that taking the Tech/AI out of the market, the rest is quite cautious and already pricing in a potential adverse scenario. We don’t subscribe to this view. The market ex Tech/AI is far from priced for disappointment. In terms of 12m forward P/E multiple, S&P500 is currently at 19.4x, Tech at 27.3x and non-Tech/AI part, the remaining 65% of the index, at 17.4x. This compares to 15.3x historical median, a 10%+ premium. At the low last October, when recession was the base case for most, S&P500 was trading at 15.3x forward P/E, with Tech at 18.1x and SPX ex Tech at 14.5x. Importantly, these P/E multiples are based off forward earnings which are generally near all-time highs, and significantly above the 2019, pre-COVID, levels. Market earnings levels are not depressed in the historical context, and have not seen any absolute downside, apart from some notable subsectors, such as Chemicals, Mining and Transport. Further, the current market valuations need to be put in the context of higher rates than in the past 10-20 years, and meaningfully higher at the short end. If one looks at yield gaps, comparing dividend yield to bond yield, all key DM markets are now trading less attractive than their 20-year average, apart from Japan (OW), which continues to screen cheap. The above considerations add to much higher positioning and more optimistic sentiment than was seen at the start of the year. FOMO is in full swing, there is complacency being built into stocks with VIX at the lows of its range. All this suggests that, if the activity momentum does weaken in 2H, relative to the current projections of no/soft landing, stocks are unlikely to shrug it off, or look through, as they are not priced for disappointment anymore, even if one is to fully take out the Tech/AI/FAANG groups from the equation.
 
This podcast was recorded on 10 July 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at http://www.jpmm.com/research/content/GPS-4455973-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.