All into Account

All into Account: Regime Change: Japan to join the positive world

In this latest episode of our All into Account podcast Joyce Chang, Chair of Global Research is joined by our colleagues in Japan, Ayako Fujita, Chief Japan Economist, Tohru Sasaki, Head of Japan Macro Research, Takafumi Yamawaki, Head of Japan Fixed Income Research, Ben Shatil, Japan Senior Economist and Rie Nishihara, Head of Japan Equity Strategy, to discuss Japan’s exit from negative yields and a low inflation equilibrium, including the longer-term implications for global markets and liquidity from our recently published note J.P. Morgan Perspectives: Japan’s Big Exit: Ten Questions about Japan’s Regime Change.
Speakers:Joyce Chang, Chair of Global Research Tohru Sasaki, Head of Japan Macro ResearchAyako Fujita, Chief Japan EconomistTakafumi Yamawaki, Head of Japan Fixed Income Research Benjamin Shatil, Japan Senior EconomistRie Nishihara, Head of Japan Equity Strategy
This podcast was recorded on February 13, 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4320561-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.
 

Equity Strategy: US vs International convergence remains one of the main regional calls, along with OW UK and OW China

Speaker: Mislav Matejka, Head of Global Equity Strategy
Big picture, we believe that the equity rally that we hoped would be driven by peaking bond yields/CPI, China reopening, and the fall in European gas prices, is unlikely to get the fundamental confirmation for the next leg higher as the year progresses. Once the positioning recovers, Q1 is in our view likely to mark the high point of the market. Given this setup, the question is why not do the traditional regional shift, out of International plays and back to the US. We do not believe that the best way to position for the upcoming risk reduction that we envisage is to favour the S&P500. We argued for a convergence trade entering 2022, out of the US and into International, and would advise to keep it, even with potential equity weakness from here. US might not be a good place to hide this time around, as Technology is moving from secular to cyclical. Despite our view of peaking bond yields from October, when we advised to close the shorts on Tech, the sector is unlikely to be a sustainable leader; it is still priced not far from all-time highs. This is not a great starting point. Further, we do not believe that Tech will be immune to any potential earnings disappointments in a downturn, in contrast to the past decade. Valuation differential remains clear, with US trading at 18x questionable earnings, compared to Eurozone and Japan at 12-13x, and FTSE100 at 11x. Eurozone is trading at a bigger discount than typical vs the US, even when adjusting for the different sector composition. On margin, China reopening and lower gas prices favour Europe, while politics could be a problem for the US this year, especially with respect to the debt ceiling. We are certainly not calling for a decoupling. Having said that, it is notable that in the 1970s there were long periods when European markets performed much better than the US, even when the US was down materially. In our regional allocation, we held OW on Europe vs US through the last 12 months, with the preference for FTSE100 within Europe. We keep this regional bias, for now, despite the 25% relative outperformance of Eurozone since September, in USD terms. There might be a time coming up to take profits on Europe vs US trade, perhaps closer to the China reopening getting more fully priced it, but we do not advocate it just yet.
This podcast was recorded on 12 February 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4331948-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.
 

All into Account: Cross Asset Strategy - Catching up with Alternative Investment Outlook & Strategy team

Helped by resilient fundraising and smoother valuations, the reported AUM of the universe of Alternative Investments (AI) likely ended 2022 only modestly lower from 2021 despite last year’s correction in asset prices. While the valuation gap between private and public markets remains, the gap has narrowed significantly in recent months reducing a previous headwind for private assets. New loans in the private credit market are being originated at much wider spreads, around 200bp wide of public market pricing. We thus upgrade private credit to overweight within alternatives along with hedge funds. We downgrade digital assets given the drying up of crypto VC funding.
Speakers:
Thomas Salopek, Global Cross Asset Strategy
Nikolaos Panigirtzoglou – Global Markets Strategy
Nelson Jantzen - US High Yield & Leveraged Loan Strategy
Mika Inkinen - Global Markets Strategy
Federico Manicardi - Cross-Asset Fundamental Strategy
Nishant Poddar – Global Markets Strategy
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-4325496-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

All into Account: ‘How and when does the Equity market rally end?’ with Mislav Matejka, Head of Global Equities Research, and Jason Hunter, Head of Technical Research

The stock rally that started in the Fall of 2022 benefited from very low positioning and peak bearishness. Now positioning is no longer stretched and sentiment assumes a relatively pain-free soft landing. The rates moves are already well priced into stocks, and with the VIX at ~18 indicating complacency, stocks can be prone to a stress event this quarter, with weak earnings and geopolitics possible drivers. 
 
Speakers Thomas Salopek, Head of Global Cross Asset Strategy Mislav Matejka, Head of Global Equities Strategy Jason Hunter, Head of Technical Strategy This podcast was recorded on Jan. 7, 20232. 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-4325942-0, https://www.jpmm.com/research/content/GPS-4325446-0.pdf, and https://www.jpmm.com/research/content/GPS-4325211-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved. 

Equity Strategy: February Chartbook

Speaker: Mislav Matejka, Head of Global Equity Strategy
Some of the equity market supports that we were highlighting in Q4 – peaking bond yields, China reopening, lower European gas prices – are not exhausted, but a lot has repriced. SX5E is up 30% off the lows, and MSCI China up 55%. We argued that supportive seasonals at the start of the year and light positioning would still be helping as we move through Q1, but positioning is quickly normalizing. Sentiment was very downbeat 6 months ago; now investors are more comfortable chasing the market, with a bounce back towards neutral in Bull-Bear indicator, stretched RSIs, rebound in HF betas and a fall in Put/Call ratios. Crucially, we think the fundamental confirmation for the next leg of the rally will end up lacking, consequently Q1 will likely mark a high-water mark for the market. The cushion of consumer excess savings has been eroded, and money supply in the US and Europe keeps contracting. We held a view over the past two years that corporate earnings would be resilient, but this might start changing. Profit margins are at a record, currently much higher than pre-COVID-19, and pricing power is likely to deteriorate from here. Q1 results are coming out mixed, to date, with a sharply reduced proportion of beats, and the typical upward revisions that one sees as we move through reporting season so far are missing. Apart from likely renewed deterioration in fundamentals in 2H, potential curveballs could come from US politics, among other, as the market is now becoming complacent given that VIX is near the low of the range, at only 18x. International markets continue to screen as much more interesting than the US: stay long Europe vs SPX, keep OW FTSE100 and keep OW MSCI China. We were bullish Value vs Growth style last year, but this year look for stalling in Value, especially if our October call for peaking US yields keeps tracking. Finally, use the remaining Q1 rally to cut beta of a portfolio.
This podcast was recorded on 05 February 2023.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4325446-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.
 

All into Account: ‘EM Fixed Income & Currencies: Has positioning run too far?’ with Saad Siddiqui, Global EM Strategist, and Anezka Christovova, Head of EMEA Local Markets Strategy

EM fixed income assets have continued to rally, but in the near term risk appetite has probably gone a little too far. Our EM FX Risk Appetite Index shows overbought conditions in EM FX, and EM sovereign positions are now firmly OW according to our Client Survey. There are fewer signs that EM rates markets are overly positioned, so we continue to be bullish local bonds.
 
 
This podcast was recorded on January 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-4317702-0, https://www.jpmm.com/research/content/GPS-4319230-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: Capex will be dependent on earnings delivery and on credit availability

Speaker: Mislav Matejka, Head of Global Equity Strategy
The main catalysts that we were looking for to drive an equity market recovery are being worked through. Entering Q4 of last year, we called for the peak in bond yields, China reopening to be the first next trade to position for, and finally for European gas prices to move lower as we enter winter, given ample supply. Our stance is that, in Q1, initially the market will keep moving higher, given good seasonals, light positioning and re-risking drive, but also that ultimately one should end up fading this upmove. Q1 will, in our view, likely mark a turning point, as the fundamental confirmation for the next leg higher might not come, and instead stocks could hit an air pocket of weaker earnings and activity as we move through Q2 and Q3. Beyond the still sharply decelerating money supply in the US and in Europe, inverted yield curve, no Fed pivot in sight and the continuing QT in the background, we believe that what was a very resilient corporate profits backdrop over the past two years will start to turn lower, as the pricing power reverses. What does that mean for capex? We see all three key drivers of capex deteriorating. Corporate earnings historically had a very strong leading correlation with capex plans. Second, Banks’ lending standards have been tightening of late, and the availability of credit has a clear relationship with capex spend. Finally, utilisation rates could weaken again as the year progresses, which also impacts capex. These three hold both for the US and for Europe. Capital Goods stocks have been the beneficiaries of the current rally, now back to price relative highs. They have never really had much of an earnings and topline reset, such as would be seen in past downturns. Their EBIT margins are at record highs, and their P/E relatives are also at record. We think Capital Goods will be one of the sectors that will start to face a more challenging backdrop as we move through the year, as the current rally that we were looking forward to peters out.
 
This podcast was recorded on 30 January 2023
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4318863-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.
 

All into Account: ‘Unveiling our 3-5y Capital Markets Assumptions process’ with Tom Salopek & Federico Manicardi

Speakers:
Thomas Salopek, Head of Global Cross Asset Strategy
Federico Manicardi, Cross Asset Strategist
 
This podcast was recorded on 25 January 2023.
This communication is provided for information purposes only. Institutional clients can view the related report https://www.jpmm.com/research/content/GPS-4286579-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: Earnings Outlook - The surge in corporate pricing power to start reversing as the year progresses

Speaker: Mislav Matejka, Head of Global Equity Strategy
The consensus view over the past two years was that margins were at risk of contraction given the big spike in input costs. We disagreed. We maintained a bullish earnings view as inventories were non-existent and as consumers were flush with cash, legacy of excess savings from COVID times. This backdrop enabled corporates to use the spike in input costs as an opportunity to raise prices. Indeed, the correlation between PPIs and corporate profits has historically been strongly positive. We believe that this correlation will continue to hold, but from here in the negative direction. This is especially as corporate inventories have been rebuilt, supply chains normalized and COVID dislocations finished. In addition, there is no further extraordinary support for the top line in DM, as pent-up demand has been exhausted, and the once dramatic consumer excess savings have been eroded. One could see increased discounting and downtrading. It is notable that the intentions of corporates to raise prices have rolled over sharply in the past few months. The risk-reward is more challenging still given that US and European profit margins are at historical highs, significantly above pre-COVID levels. Earnings projections for 2023 have been cut somewhat, but consensus is still looking for upside this year, and a meaningful acceleration next year. These are at risk. The question is whether the negative impact will start already with Q4 results, or will it be delayed to later this year. PMI momentum suggests that the earnings growth rate in Q4 should have moved into negative territory, but even if companies do not disappoint for Q4, we do not believe EPS upgrades are likely in 1H.
 
This podcast was recorded on 22 January 2023
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4313317-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.
 

China’s Re-opening

Our analysts discuss China’s re-opening, what it could mean for financial markets, and how it could impact the global economy.
 
Speakers:
Wendy Liu – Chief Asia and China Equity Strategist
Thomas Salopek – Head of Cross Asset Strategy Research
Haibin Zhu – Chief China Economist and Head of Greater China Economic Research
 
Moderator:
Samantha Azzarello – Head of Content Curation and Strategy
 
This podcast was recorded on 11 January 2023.
This communication is provided for information purposes only. Institutional clients can view the related reports at:
https://www.jpmm.com/research/content/GPS-4292090-0
https://www.jpmm.com/research/content/GPS-4300063-0
For more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.