All into Account

All into Account: ’European Credit: Value getting hard to ignore’ with Matt Bailey, European Credit Strategist

Matt joins us to discuss we are turning neutral on investment grade, having been bearish for most of the past year.
 
Speakers:Thomas Salopek, Global Cross Asset Strategy
Matthew Bailey, European Credit Strategist
 
This podcast was recorded on October 17, 2022.
This communication is provided for information purposes only. Institutional clients can view the related reports at https://www.jpmm.com/research/content/GPS-4231874-0, and https://www.jpmm.com/research/content/GPS-4232564-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: Earnings outlook, margins and past downturns

Speaker: Mislav Matejka, Head of Global Equity Strategy.
Q3 reporting season is coming up. While EPS revisions have been incredibly resilient so far, with Eurozone earnings for 2022 net revised up 12% ytd, UK up 33%, and US net flat, earnings are finally likely to see some weakness in Q3, and onwards, as PMIs are in contraction territory. There is a gap now between activity levels and analyst projections. FX makes a big difference regionally, where in Europe weaker currency helps exporters, while the US will see a headwind. We expect continued PMI weakness, driven by our lead indicator, real M1, with a base case of a Eurozone recession starting in Q4, which will result in earnings contraction. We hold -10% EPS growth projection for Europe in 2023. If realized, this would imply a meaningfully milder move in forward EPS by consensus from peak to trough, versus the typical 20-40% drawdown seen in past downturns in key regions. Why could European earnings hold up better than typical in the upcoming recession? 1. Stronger topline growth this time around, and earnings remain nominal variables. 2. Less delinquency risk, and fewer recapitalizations likely, which are typically heavily earnings dilutive. There is no need for a protracted balance sheet recession, or sustained falls in house prices, given that there is not much housing inventory in US or Europe. 3. Geopolitics is a wild card, with a risk of further escalation, but we don’t expect forced shutdowns this winter, as gas storages are full, and more LNG is coming in – Eurozone natural gas prices are now down more than 50% from August highs. We anticipate continued government intervention to shield consumers and industry from the bulk of the energy price spike. 4. FX is a big tailwind for European earnings this time around. Of course, for the US the FX is working negatively, but our economists still don’t have recession as a base case in the US. Notably, the gap has opened up between US and European equity prices and earnings, both in lc and in USD. 5. China has been countercyclical to US & Europe in the last two years, showing significant weakness. For 2023, it could stay countercyclical, but this time become more of a tailwind for growth given the easy hurdle rate, just as Europe is in a recession.
 
This podcast was recorded on 17 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-4232065-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

How are higher interest rates affecting household finances?

In this episode, we will discuss the impact of higher inflation and interest rates on household finances. The IMF notes that the average global cost of living has risen more in the 18 months since the start of 2021 than it did during the preceding five years combined. Inflation on essentials such as food & fuel has now reached 40% in the UK versus 2019 levels.
Speakers
Joyce Chang, Chair of Global Research
Georgina Johanan, European General Retail Equity Research
Chris Wheat, President of the JPMorgan Chase Institute
 
This podcast was recorded on October 11, 2022.
This communication is provided for information purposes only. Institutional clients can view the related reports at https://www.jpmm.com/research/content/GPS-4213923-0.pdf,   https://www.jpmorganchase.com/institute/research/household-income-spending/household-pulse-cash-balances-through-june-2022  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: FTSE100 remains an OW in a regional portfolio; Keep pair trade of long FTSE100 vs FTSE250

Speaker: Mislav Matejka, Head of Global Equity Strategy.
We do not believe that the positive relative case for large cap UK stocks has changed, despite what was a messy fiscal newsflow in the past few weeks. We upgraded UK to OW last November, after 6 years of our cautious stance. Even accounting for the recent elevated volatility, UK is still outperforming other key DM regions ytd, in local currency, as well as in USD terms. We believe this will continue. The UK interest rate and FX volatility is likely to abate as the government continues to adjust its course. We believe BoE intra-meeting policy moves are not needed, and look for less hikes than is currently implied in money markets. UK equities continue trading at a record discount vs other regions, currently at 8.6x forward P/E. These earnings are likely to be handicapped, but perhaps not by much, given the FX tailwind. The bulk of the FTSE100 earnings base is overseas, at 70%, and Exporters benefit significantly from currency weakness, which will act with a lag. While UK earnings have in the past downturns fallen 20-40% on average, we believe the downside is lower this time around. UK offers the highest dividend yield globally, compared to other DMs, which we believe is well covered this time. Within UK, we held an OW FTSE100 vs FTSE250 pair trade over the past year, and continue to believe this trade should be active. FTSE250 is not trading cheap vs FTSE100, despite recent underperformance, and is still sitting on near record earnings, and on dramatic past long term run. FTSE250 remains more domestically geared. Our economists project that the UK will narrowly avoid a recession, but the pressure on domestic consumption, as well as on the housing market will remain significant, given the spike in mortgage rates. We stay with the call that Exporters look better than Domestic plays. Even though Homebuilders and Retailers have already underperformed meaningfully, we would continue to avoid these, relative to the rest of the market. FX is a negative for them.
 
This podcast was recorded on 10 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-4226275-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

All into Account: Food Insecurity: A New Normal

Tune into our new podcast episode on J.P. Morgan Research’s All into Account channel where we discuss the food security crisis, which brings new challenges as concerns about geopolitics and supply chain security have magnified the fundamental instability across the global food system. The combined forces of Russia’s war on Ukraine, the pandemic and climate change point to recurring food insecurity, which is now impacting 2.3 billion people. The prevalence of severe food insecurity at severe levels has increased by 2.5%-pts since 2019, rising to the equivalent of 207 million more people. Our strategists see structurally higher food inflation and agricultural commodity prices here to stay as fundamental risks remain high. Food export restrictions have surged since the onset of Russia’s war on Ukraine, and agri prices could rise another 10-20% over the course of 2023, while fertilizer prices will remain elevated into next year. We recommend staying long the agri complex and investing in food producers that are adapting, and we favor food producers that can sustainably grow revenues at a faster pace than industry average.
 
Speakers:
Joyce Chang
Tracey Allen,
Nora Szentivanyi
Ken Goldman
Celine Pannuti
 
This podcast was recorded on September 30. 2022.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/ https://www.jpmm.com/research/content/GPS-4210680-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

All into Account: ‘Oil: what to expect after the OPEC+ cuts’ with Natasha Kaneva, Head of Global Commodities Research

Natasha joins us to discuss her views on oil in the wake of the recent OPEC cut. We cover the key factors impacting her price targets.
Speakers:
Thomas Salopek, Global Cross Asset Strategy
Natasha Kaneva, Global Commodities Research
 
This podcast was recorded on 6 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-4224965-0, https://www.jpmm.com/research/content/GPS-4223305-0, https://www.jpmm.com/research/content/GPS-4220388-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: October Chartbook

Speaker: Mislav Matejka, Head of Global Equity Strategy.
We argued last week that bonds are likely becoming oversold, as Fed and inflation sentiment have moved to extremes. We believe that we are already starting a disinflation phase, as inflation remains a lagging indicator of growth. More concrete signs of peaking inflation, as well as of the peaking inflation expectations, and finally the weakness in activity all suggest bond yields should be capped going forward. Earnings have been very resilient, but are likely to finally show a rollover in Q3. Here, we think that the activity reset is what investors need to see in order to start looking through. Also, recession is our base case, but earnings could hold up much better this time around than during past downturns. Eurozone gas prices likely have two way risk from here, not just the upside risk. JPM assessment remains that there will not be a need for outages. Sentiment metrics are at record lows, and positioning appears very light. Seasonals turn much more favourable in Oct-Dec period. While Value was our key OW entering the year, we called last week for a renewed tactical bounce in Growth style, and Tech in particular, to be aided by potentially peaking bond yields. Regionally, UK remains a OW, given extreme valuation discount, as well as a tailwind for exporters from weak FX. We keep pair trade of OW FTSE100 vs FTSE250.
 
This podcast was recorded on 03 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-4220113-0 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: ‘How to position in UK rates and GBP after the colossal moves’ with Francis Diamond, Head of UK Rates Strategy, and Meera Chandan, Head of Global FX Strategy

Speakers:Thomas Salopek, Global Head of Cross Asset Strategy
Francis Diamond, Head of UK Rates Strategy
Meera Chandan, Head of Global FX Strategy
The markets had a strong reaction to the UK’s unfunded fiscal stimulus, producing outsized moves in UK rates and the pound. Given the volatility, we discuss the potential reactions from the government and the BoE to restore confidence, as well as our views on how to position.
This podcast was recorded on 28 September 2022.This communication is provided for information purposes only. Institutional clients can view the related reports at :  www.jpmm.com/research/content/GPS-4215583-0, and  www.jpmm.com/research/content/GPS-4214409-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

All into Account: Back to School Essentials

Russia’s war on Ukraine appears to be at a turning point as Putin’s strategy has shifted with his partial mobilization announcement on September 20 in which he calls up 300,000 reservists with an explicit mention of nuclear options. So what lies ahead? We are pleased to feature Ambassador Daniel Fried, Weiser Family Distinguished Fellow and former US Ambassador to Poland, who is a 40-year US Foreign Service diplomat who crafted US sanctions against Russia and also helped craft the policy of NATO enlargement to Central European nations and is joined by Natasha Kaneva, Head of J.P. Morgan’s Commodity Strategy, and Jan Loeys, Head of Long-term Strategy, who is part of our Strategic Research team. For background on these topics, see our earlier investor webinar, Back to School Essentials, September 17, 2022.
Note that the guest expert views presented do not necessarily coincide with those of the J.P. Morgan’s Global Research franchise.
Speakers:
Joyce Chang, Chair of Global Research
Jan Loeys, Head of Long-term Strategy
Natasha Kaneva, Head of Global Commodities Strategy
This podcast was recorded on September 26, 2022.
This communication is provided for information purposes only. Institutional clients can view the related report at www.jpmm.com/research/content/GPS-4206335-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.
 

Equity Strategy : From one extreme to another; Good entry point to look for a renewed tactical bounce in Growth

Speaker: Mislav Matejka, Head of Global Equity Strategy.
The market has now settled into a view that Fed will continue with outsized hikes for the foreseeable future. What a difference to only a year ago when almost no hikes were priced in. So, will the next 6-9 months be like the last 6-9 months? Will the Fed deliver on what is currently priced in, and more fundamentally, do they need to deliver on this in order to achieve their inflation objective? So far this year, there was no other problem to focus on bar inflation, as payrolls were exceptionally strong every single month, averaging ~400k ytd. In a sense, it was “easy” for the Fed to maintain a hawkish message, as the collateral damage was not yet visible. Next 6-9 months are likely to look quite different. For one, US composite PMI is at 49, in contraction territory. A number of corporates are warning on earnings outlook. Inflation will show more and more visible signs of a peak and a move lower. PPIs are down, pointing to softer prints, as are pretty much all commodity prices. Many inflation outlook metrics are also showing some softening. Inflation expectations within consumer confidence surveys have turned lower of late. Inflation forwards are also lower most recently. There is more evidence of inventory overhang, and discounting, as well as of downtrading in corporate results. Corporate pricing intentions have clearly turned lower. After all, inflation has always been a lagging indicator of growth. Finally, Fed is not starting this next phase from a zero level, and desperately behind the curve, but from 3.25%. This could act to limit further moves up in long yields, which look oversold right now. We note that the gap between PMIs and yields is these days at the other extreme. In the last 1.5 months Value style outperformed again, with top sectors Banks, Insurance and commodities. We have entered the year-long Financials and OW both Mining and Energy, and stay so from the fundamental perspective, especially OW Banks&Insurance given likely strong earnings trends and a limited delinquencies risk. Now that Growth, and Tech, have traded back down though, there could be an opportunity for another tactical bounce in Growth, similar to what we have seen in the summer.
 
This podcast was recorded on 26 September 2022.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4214271-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.