All into Account

Equity Strategy: July Chartbook – Divergences are building, how will they close?

Speaker - Mislav Matejka, CFA, Head of Global Equity Strategy
The market is increasingly confident that the weak parts of the economy are set to improve, and that the good parts will stay resilient. In a sense, bad is seen as good: “China dataflow is so weak that there must be stimulus, manufacturing PMIs are so weak that they are bound to rebound”. This is producing an interesting divergence in the performance of Cyclicals vs Defensive stocks and the activity dataflow. Compared to a year ago, Cyclicals are up vs Defensives by 20% in Europe and in the US, but manufacturing PMIs and ISM are in contraction territory. Which one will end up right? There was another period when the divergence like this opened up – in 2007, with Cyclicals rallying despite manufacturing activity weakness, and Fed was then also at 5.25%, with the belief that they needed to do more, the same as now. Fundamentally, we think that bond yields will move back down, pricing power is waning, PMIs could indeed converge, but with services coming down towards manufacturing in 2H, as M1 suggests, rather than the other way around, and the hopes of a swift and meaningful China stimulus could remain just that, hopes. The market needs to resolve a basic disconnect: how will the Fed pivot if there is no pain? Bull-Bear has moved into positive territory, Vix is near record low and positioning has increased, there is no more safety net, FOMO is in full swing. Keep UW Eurozone in regional allocation, stay cautious on China, Japan remains our regional OW for this year. Preference for Growth over Value should remain a winning strategy in 2H.
This podcast was recorded on 02 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-4450902-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.
 

All into Account: 2023 Mid-Year Outlook Key Takeaways

Speakers:  Samantha Azzarello, Head of Content StrategyThomas Salopek, Head of Cross-Asset StrategyBruce Kasman, Chief Economist for J.P. MorganMislav Matejka, Head of the Global Equity Strategy Stephen Dulake, Global Head of Credit, Securitized Products and Public Finance ResearchJay Barry, Co-head of US Rates StrategyFabio Bassi, Head of European Rate StrategyJonny Goulden, Head of EM Local Markets & Sovereign Debt StrategyMeera Chandan, Co-Head of the Global FX StrategyNatasha Kaneva, Head of the Global Commodities Strategy 
This podcast was recorded on Jun 27, 2023.This communication is provided for information purposes only. Institutional clients can view the related reports at  https://www.jpmm.com/research/content/GPS-4442931-0, for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: Reiterate that broadening in leadership is unlikely to have legs without yields, PMIs nor earnings moving up

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
We believe that the broadening in market leadership that was seen at some points this month is unlikely to have legs, as we don’t expect bond yields to move higher, especially not for the right reasons. Cracks in the labour market are emerging, manufacturing PMIs are not converging with services, as consensus was expecting; in fact the opposite appears to be happening, and any China stimulus might end up underwhelming – sell the news. We keep OW Growth vs Value style, and think that pure Defensives could catch a bid – Staples, Utilities and Healthcare, given our projection of falling bond yields in 2H, risk of weaker PMIs and challenging EPS revisions. EPS revisions for S&P500 have finally moved positive for some weeks, the first time since last summer, but any continued improvement will be at odds with a potentially weakening labour market. The claims indicator last week entered into bearish territory. Also, one typically needs composite PMIs above 53-54 in Eurozone for sustained EPS upgrades, but that might be lacking. Manufacturing PMIs are unlikely to bounce much if one considers M1 leading indicators, and the services PMIs are at risk of rolling over, too. This would be reinforced if the labour market is turning, as this could undermine the so far resilient final demand picture, and lead to more destocking. Regionally, we think the trade of OW UK or OW Switzerland vs UW Eurozone should be put on in 2H, we reiterate our downgrade of Eurozone to UW from last month.
 
This podcast was recorded on 26 June 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at http://www.jpmm.com/research/content/GPS-4445719-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

All into Account: ‘Oil Markets: The Labors of Sisyphus’ with Natasha Kaneva, Head of Global Commodities Research

Speakers:  Thomas Salopek, Global Cross Asset Strategy Natasha Kaneva, Head of Global Oil and Commodities Research 
 
This podcast was recorded on June 15, 2023.This communication is provided for information purposes only. Institutional clients can view the related reports at  https://www.jpmm.com/research/content/GPS-4431498-0, and https://www.jpmm.com/research/content/GPS-4436085-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

All into Account: El Niño - Market implications for Asia, and why we think the spotlight turns to climate adaptation

After three years of La Niña conditions, climate prediction models are forecasting a transition to El Niño later this year. This could mean lower rainfall across parts of Asia, among other effects, and has market implications, particularly in commodity- and consumer-related sectors. A switch to El Niño could also exacerbate the warming effect of climate change and see global temperatures temporarily breach the 1.5°C threshold of the Paris Agreement for the first time. From an ESG and climate change investing perspective, new heat records could refocus the lens on adaptation, which, so far, has proven to be an under-invested theme. J.P. Morgan analysts Jeff Ng, Sin Beng Ong, Jeanette Yutan, Sanjay Mookim and Hannah Lee discuss all of this.
This podcast was recorded on Jun 07, 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at https://jpmorganmarkets.com/research/content/GPS-4401757-0, https://jpmorganmarkets.com/research/content/GPS-4416824-0, https://jpmorganmarkets.com/research/content/GPS-4408623-0 and https://jpmorganmarkets.com/research/content/GPS-4407092-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: Regional allocation - assessing the relative attractiveness of Japan vs Eurozone

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
Out of larger DM exposures, we started the year with constructive calls on both Eurozone and on Japan. Within this, we have last month cut Eurozone,  to outright UW. The question is why stay OW Japan then, given that Japan is typically seen as having a similar type of exposure as Eurozone is, a play on global manufacturing cycle with Cyclical Value sector tilts. We believe that Japan will be a better relative value trade than Eurozone in 2H, even against the backdrop of potential weakening in global activity momentum and likely falling bond yields. Apart from delivering a strong run, of 30%+ in USD terms vs the US since September, we have cut Eurozone due to worsening Growth-Policy tradeoff in the region. ECB is likely to stay hawkish given continued pickup in wage growth, but on the other side the best of the recovery in activity seen at the turn of the year is likely behind us. In addition, we believe China will keep stalling in 2H, with hopes of any material stimulus likely ending up unfulfilled. While Japan is a China and global activity play to a large extent, as well, we stay constructive Japan, reiterating the upgrade to OW made in December. Performance-wise, Japan was behind Eurozone until recently, but it is starting to break out, in USD terms as well, and not just in local FX. The reasons that Japan could act differently this time around are: first, a certain disconnect to the global cycle, on the back of the most delayed reopening within DMs, and the YCC control, driving bond yields divergence, and therefore the divergence in borrowing costs. Second, inflation for Japan could be seen as a tailwind, with real wages expected to finally move up, rising asset values and improving pricing power. In a sense, Japan could be a good hedge on inflation risk, in the event inflation turns out to be more problematic than consensus assumes. Third, Japanese equities remain extremely cheap, with the highest proportion of net cash companies, and there is at long last a catalyst for rerating – in the form of TSE initiative. Japanese buybacks are rising.
 
This podcast was recorded on 11 June 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at http://www.jpmm.com/research/content/GPS-4435627-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.
 

All into Account: ‘Is Market Breadth improving or not?’ with Mislav Matejka, Head of Global Equities Strategy

Speakers:  
Thomas Salopek, Head of Global Cross Asset Strategy Mislav Matejka, Head of Global Equities Strategy  
 
This podcast was recorded on June 8, 2023.This communication is provided for information purposes only. Institutional clients can view the related reports at https://www.jpmm.com/research/content/GPS-4430667-0, https://www.jpmm.com/research/content/GPS-4430186-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.   

Equity Strategy: June Chartbook

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
The real “pain trade” in the market is clearly the breakout driven by Cyclical Value stocks, exactly like what took place on Friday. As a result, MXWO finally closed above the Q1 high. This could have legs if real yields are up for the right reasons, if China stimulates big, or if manufacturing PMIs inflect higher. The narrative behind the Friday move fits some of the above, but we do not see it getting a confirmation. We think yields will move back down, pricing power is waning, labour market signals are more mixed beneath the surface, with WARNs moving up, any China stimulus is unlikely to be meaningful, PMIs could indeed converge, but with services coming down towards manufacturing in 2H, as M1 suggests, rather than the other way around. Up to Friday move, the internal market leadership was extremely narrow. All S&P500 sectors, apart from Tech complex, were flat/outright down on the year. We are more positive on Tech this year than last, but the Tech rally has been quite exceptional, it is looking overbought, and on the other side we do not expect Cyclicals to bounce sustainably. We see Cyclicals stalling again, as typically happens around the last Fed hike in the cycle. Stay OW Growth vs Value, keep fading Cyclical Value, and reiterate last month’s closure of Eurozone vs US trade.
This podcast was recorded on 05 June 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4430186-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.
 

All into Account: ‘Banks update’, with Vivek Juneja, Head of Large Cap Bank Research

Speakers: 
Thomas Salopek, Head of Global Cross Asset Strategy
Vivek Juneja, Head of Large Cap Bank Research
 
This podcast was recorded on May 30, 2023.This communication is provided for information purposes only. Institutional clients can view the related reports at www.jpmm.com/resehttps://www.jpmm.com/research/content/GPS-4353731-0, for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: China continues to fade - reiterate the closing of Eurozone vs US trade

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
After a sharp ~60% rally during Nov-Jan, on the back of the reopening drive, MSCI China has lost 20% since. The latest China economic numbers, for April, have underwhelmed, including IP, retail sales and FAI. This is joining peaking PMIs, 20% lower iron ore price from highs, as well as a big slowdown in China CESI. The concern is weak confidence, which has restricted the broadening of recovery. The consumer might not get stronger, FAI and property are both structurally challenged, the external backdrop might not help and geopolitics could stay tough. Furthermore, our economic team does not anticipate any meaningful new stimulus measures for the rest of the year. Internal consumer mobility metrics have fully recovered, such as subway ridership and domestic flights. Unlike in the US and Europe, there might not be much pent up demand, as Chinese consumers didn’t enjoy significant cash transfers during Covid lockdowns, and there are reports of wage cuts in certain industries. The property market has stabilized, post the sharp fall in activity, but new land sales are lower 30% ytd. The house prices are at risk of weakening. Tier 1 house prices in China are not dissimilar to what was observed in Japan in 1990, in terms of affordability. FAI and infrastructure spend could continue to lag, absent a fresh policy stimulus. FAI shares of GDP remain very high, compared to other countries. We believe that China exposure baskets might keep disappointing and more broadly we remain UW Value vs Growth style this year. China reopening was one of the big supports for Europe trade, where Eurozone beat the US by 30%+ since last September to most recently, in USD terms. The likely China rollover is one of the reasons why we decided to cut this trade earlier in the month. With this closure, we have the OWs on the following regions globally: Japan, UK and Switzerland.
This podcast was recorded on 29 May 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4425285-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.