All into Account

Equity Strategy: When to close the preference for Europe over the US? Q1 results still to be better, but don’t extrapolate

Speaker: Mislav Matejka, Head of Global Equity Strategy
Regionally, we are OW International equities vs the US, and within this specifically Europe vs the US, a position we held through 2022 and so far ytd. The question is when should one close this trade? Internal leadership might become increasingly difficult for Europe to keep beating the US, especially if our call of Value underweight this year, and the recently introduced preference for lower beta part of the market - where we in particular cut Autos, and added to Staples - keeps gaining traction. So far ytd, Value is behind in both Europe and in the US, and the Defensive stocks are staging a recovery - Eurozone has historically been more of a Cyclical Value tilted play. The big benefits for Europe that we were highlighting in Q4, of falling gas price and the China reopen, are now in the open. Eurozone has enjoyed a strong rebound in PMIs since November on the back of these, of 7 points, but the upmove could be petering out soon. We note that Eurozone valuations vs the US continue to screen cheap, but it appears that the consensus call these days is to be OW Europe vs the US, and the region has strongly outperformed in the past few quarters. Eurozone is up vs the US by 31% in USD terms since the September low. We are remaining OW Europe vs the US, for now, but think that the time to take profits on the trade is approaching. Looking at Q1 reporting season, the consensus expectations have come down aggressively over the past months, from +7% yoy for S&P500, to current -7%. In contrast, activity in most places was better in Q1 vs the previous quarter. The combination of low hurdle rate and the improving fundamentals bodes well for the corporate results, where we expect beats. Having said that, the beats might not lead to upgrades for the rest of the year. 2023 projections keep moving lower. Also, the question is whether the stocks will rally much further on the back of beats, post an already strong rally. We advise to use any strength on the back of positive Q1 results as a good level to reduce from. Finally, consensus expectations are for a renewed margin acceleration in 2024, which could prove too optimistic, as pricing normalizes.
 
This podcast was recorded on 24 April 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4392460-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Top Ten Takeaways from J.P. Morgan’s Investor Seminar during the 2023 IMF/World Bank Spring Meetings: Market pricing and investor expectations diverge

In this latest episode of our All into Account podcast and video, Joyce Chang, Chair of Global Research, is joined by J.P. Morgan’s Bruce Kasman, Chief Economist, Jan Loeys, Strategic Research, Jahangir Aziz, Head of Emerging Market Economics Research, Luis Oganes, Head of Global Macro Research, and Saad Siddiqui, Emerging Markets Fixed Income Strategy dive deeper into our top ten takeaways from the J.P. Morgan Investor Seminar hosted during the 2023 IMF/World Bank Spring Meetings. The mood was downbeat but not overly bearish in our view, and there were few signs of complacency with “fragmentation,” “setting up guard rails” and “re-globalization, not de-coupling” among the key buzzwords and catch phrases.
Speakers
Joyce Chang, Chair of Global Research
Jan Loeys, Strategic Research
Bruce Kasman, Chief Economist
Luis Oganes, Head of Global Macro Research
Jahangir Aziz, Head of Emerging Market Economics Research
Saad Siddiqui, Emerging Markets Strategy
Related Research:
Top 10 Takeaways from J.P. Morgan’s Investor Seminar during the 2023 IMF/World Bank Spring Meetings: Higher for longer despite rising financial stability risks (https://www.jpmm.com/research/content/GPS-4390217-0), Joyce Chang et al., 19 April 2023
Investor Survey Results from 2023 IMF/World Bank Spring Meetings: Recession fears still top of mind with downside seen to current valuations, particularly global equities (https://www.jpmm.com/research/content/GPS-4387732-0), Joyce Chang et al., 17 April 2023
Feeling edgy: Smaller countries make for big stories in DC: Takeaways from IMF/WB meetings (https://www.jpmm.com/research/content/GPS-4390074-0), Nicolaie Alexandru, Ben Ramsey, Katherine Marney, 20 April 2023
Emerging Market Takeaways from IMF/World Bank Spring Meeting (https://www.jpmm.com/research/content/GPS-4386452-0), Luis Oganes et al., 18 April 2023
This podcast was recorded on April 20, 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.

All into Account: ‘Best opportunities in SMidCap stocks’, with Eduardo Lecubarri, Head of SMidCap Strategy

Speakers:
Thomas Salopek, Head of Global Cross Asset StrategyEduardo Lecubarri, Head of SMidCap Strategy
This podcast was recorded on April 14, 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4375824-0, www.jpmm.com/research/content/GPS-4375240-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.
 

Equity Strategy: Can Technology keep driving the markets higher?

Speaker: Mislav Matejka, Head of Global Equity Strategy
We argued last October that one should be buying back the Tech sector, following a year of sharp underperformance, and given our view that US long yields had likely peaked at tat point. The question is, will Tech keep driving the market higher? So far ytd, S&P500 is up 7%, but ex-Tech this stands at just 2%. FAANG is up as much as 26% ytd. We continue to believe that Tech will be trading better this year than it did last, but at the same time, think that the recent Tech run is becoming stretched, in absolute terms. It is looking overbought, close to all-time highs, with RSIs that are nearing elevated territory. Valuations of the sector are up meaningfully from last October, with FAANG P/E back at 1 standard deviation expensive. Globally, Tech P/E relative is closing in on 20-year highs. Our call is that bond yields will be down further from here, but the Tech bounce appears to have over-discounted that now. In addition, the clear and rising risk is that the Fed does not deliver on market expectations for cuts in 2H of the year. Real rates could stay higher, with Tech inversely correlated to them. With respect to the earnings outlook, consensus expectations are for the Technology sector to expand its profit margins by as much as 140bp next year, the largest increase of all sectors, and which would put it at new all-time highs. We see risks to this, especially if the economy weakens into a downturn Within Tech, we argued that unprofitable parts will not perform, with our more positive stance on quality, good cash flow parts. We continue with this view. Non-profitable Tech and Fintech are underperforming by 10-20% since October, even as they are becoming more attractively valued. In conclusion, we do not advocate to be short Tech, and still think the sector will be trading better than last year, relative to the market, but think that its absolute run is becoming stretched. In general, we believe that positioning in pure Defensive plays – where we have recently advised to add to them – such as Telecoms, Utilities, Staples and Healthcare, could be the best place to be over the next months.
 
This podcast was recorded on 11 April 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/ for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.
 

All into Account: ‘US High Yield: The next shoe to drop?” with Nelson Jantzen, Head of US High Yield and Leveraged Loan Strategy

As the regional bank stress subsides, we consider whether US High Yield or Leveraged Loans will be the next weak link to snap. Nelson joins us to share his market views.
 
Speakers Thomas Salopek, Head of Global Cross Asset Strategy Nelson Jantzen, Head of US High Yield and Leveraged Loan StrategyThis podcast was recorded on Apr 04, 2023. This communication is provided for information purposes only. Institutional clients can view the related reports at https://www.jpmm.com/research/content/GPS-4375240-0, https://www.jpmm.com/research/content/GPS-4377007-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.  

All into Account: ‘Saudi 101: our primer on the Saudi Arabian stock market’ with David Aserkoff, Head of CEEMEA Equity Strategy

Speakers Thomas Salopek, Head of Global Cross Asset Strategy David Aserkoff, Head of CEEMEA Equity Strategy
This podcast was recorded on Mar. 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-4267128-0, https://www.jpmm.com/research/content/GPS-4328949-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.  

Equity Strategy - Trading around the last Fed hike: typically low beta bond proxies work; Equities-bonds correlation turning

Speaker: Mislav Matejka, Head of Global Equity Strategy
 
Our view remains that Q1 will have likely marked the high point for equity prices for this year, and we look for recessionary trading in 2H, with low beta preference, and an increasing caution on Cyclicals/Banks/Value exposure. As the initial SVB/CS driven correction was sharp, we argued last week that market appeared oversold short term, with relief bounce likely, but also that one should use the bounces to reduce exposure. We do not see these rebounds persisting, the policy mistake risk keeps building. In a nutshell, we do not expect a fundamental improvement in equities risk-reward until the Fed is advanced with rate cuts. Within this, we believe that the bonds-equities correlation is reversing. Both bonds and equities lost money in 1H of last year, then both made money into year-end ’22 – the correlation was positive. As the recession odds are likely increasing again for 2H of this year, in our view, we think the correlation is likely to go back to a normal, inverse one. This should mean that, in down markets, low beta works, as is typical of risk-off trading, and is opposite to last year, when Value worked. The point of the last Fed hike in the cycle is approaching, and we note that bond yields move strongly lower in the aftermath of last hike. Looking at market internals, there is a clear preference for low beta bond proxies into, and post, the last Fed hike in the cycle. Healthcare and Staples were the consistent outperformers. The question is how does this align with what is still seen as a robust labour market. We see the labour market as a lagging indicator of the cycle, it is likely that there is already weakening beneath the surface – note the construction job openings falling, and the Challenger job cuts moving up. It is notable that the amount of time that passes between the best/lowest unemployment rate in the cycle, and the official start of a recession, is quite short historically. It would not be unusual for the economy to see the best labour market prints in Q1 of the year, only for the 2H to potentially show recessionary behaviour. Will lower yields help equity valuations? Equity dividend yield vs bond yield gaps, vs historical averages, are not overly exciting, at present. US and Eurozone have DY-BY gaps below what is seen on average, while only Japan stands out as a clear positive. Cash at near 5% is a very high hurdle rate to surpass to be long risk assets at this stage.
This podcast was recorded on 26th March 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4369291-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.
 

All into Account: Interest rate volatility in the wake of the regional banking stress

Speakers:
Thomas Salopek, Head of Global Cross Asset Strategy
Srini Ramaswamy, Co-Head US Rates Strategy
Ipek Ozil, US Interest Rate Derivatives Strategist
This podcast was recorded on March 23, 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4363888-0, www.jpmm.com/research/content/GPS-4363906-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

All into Account: Cost of living pressures mounting

In this episode of our All into Account podcast Joyce Chang, Chair of Global Research is joined by US Economist Daniel Silver, Head of US Retailing Matthew Boss and Head of European General Retail Georgina Johanan to discuss J.P. Morgan Research’s bi-annual US and EMEA consumer surveys, which provide a pulse check on consumer sentiment and spending plans ahead. The US survey reflects the trend of 1,000 consumers in March, while the European survey reflects the trends of 5,000 consumers in March. They highlight that consumers face increasing affordability pressures, and in the US, tighter financial conditions are eroding cumulative excess savings.
 Speakers:
Joyce Chang, Chair of Global Research
Daniel Silver, US Economic Research
Matthew R. Boss, Head of Retailing: Department Stores & Specialty Softlines
Georgina Johanan, Head of European General Retail
This podcast was recorded on March 22, 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4358197-0, www.jpmm.com/research/content/GPS-4358583-0, www.jpmm.com/research/content/GPS-4363373-0, for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

All into Account: The state of global gender balance in 2023

In this latest episode of our All into Account podcast Joyce Chang, Chair of Global Research is joined by Head of Women on the Move at J.P. Morgan Chase & Co, Samantha Saperstein, along with Amy Ho and Stella Xu from Strategic Research to discuss the highlights from their annual report on gender balance, J.P. Morgan Perspectives: The state of global gender balance in 2023. Their discussion delves into the details on the progress towards achieving gender balance and assesses the challenges facing women as we approach the end of COVID-19 as a public health emergency on May 11 in the US.
 
Speakers
Joyce Chang, Chair of Global Research
Samantha Saperstein, Head of Women on the Move
Amy Ho, Strategic Research
Stella Y. Xu, Strategic Research
 
This podcast was recorded on 16 March 2023.
This communication is provided for information purposes only. Institutional clients visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.