All into Account

2023 Cross-Asset Outlook Call

Speakers & Moderators:Marko Kolanovic, PhD, Stephen Dulake, Dubravko Lakos-Bujas, Luis Oganes, Thomas Salopek, Jay Barry, Arindam Sandilya, Michael Hanson, Natasha Kaneva, Mislav Matejka, CFA, Fabio Bassi, Joyce Chang
 
This podcast was recorded on December 09 2022.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4281691-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

Cyber – The new frontline of geopolitics

In this episode of All into Account, Joyce Chang, Chair of Global Research and Amy Ho, Strategic Research welcomes J.P. Morgan’s Pat Opet, Global Chief Information Security Officer, Doug Anmuth, Head of U.S. Internet Equity Research and Haibin Zhu, Chief China Economist to discuss the impact of the Russia-Ukraine war on cyber policy, China’s continuing cyber rise, current policy responses and market implications. Cyber competition and geopolitical tensions have become inextricably linked with nation state cyberattacks on the rise and internet freedom on the decline. We assume an ongoing, constant state of cyber aggression as the new normal and do not see the introduction of a coherent cyber deterrence framework in the short term, while the cybersecurity threat is set to grow in intensity and scale for the foreseeable future.
Speakers:
Joyce Chang, Chair of Global Research
Patrick Opet, Global Chief Information Security Officer
Doug Anmuth, Head of U.S. Internet Equity Research
Haibin Zhu, Chief China Economist
Amy Ho, Strategic Research
 
This podcast was recorded on 13 December 2022.
This communication is provided for information purposes only. For more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

ESG in the USA: The Disunited States

In this episode we discuss ESG in the USA which focuses on the growing ideological divide on ESG at the state level and Midterm election implications, the impact of the Inflation Reduction Act on US climate policy and recent trends in ESG investing in a challenging year. While the Midterm election produced barely a red ripple, opposition to ESG initiatives is set to increase in the 118th Congress, which will exacerbate the growing divide on ESG in the US.
Speakers:Joyce Chang, Chair of Global Research Stella Y. Xu, Strategic ResearchKamal Tamboli, Equity Strategy and Global Quantitative ResearchNathaniel Rosenbaum, US High Grade StrategyKhuram Chaudhry, Global Quantitative Strategy
This podcast was recorded on 6 December 2022.
This communication is provided for information purposes only. Please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: Europe and Cross-Regional 2023 Outlook: The International vs US convergence to continue

Speaker: Mislav Matejka, Head of Global Equity Strategy.
Our base case for next year is a recession in Europe and the US, we keep our call for 10% European EPS contraction in 2023. On the positive side, we believe that the rise in bond yields, rise in central bank rates relative to where futures already are, the surge in inflation and the spike in the USD are all likely coming to an end. In addition, as we move through 2023, we will likely see the bottoming out in PMI momentum, as well as a trough in EPS revisions, along with more visible China reopening. These catalysts are likely to ensure that the equity performance, which stands to be pressured by the earnings and activity reset over the coming months, firms up as we move through the second half of 2023. European forward P/Es went from 16x a year ago to 9-11x at the recent low; the P/E compression is unlikely to continue, especially as our rates call is for lower Europe yields from here. Our earnings downside of 10% is smaller than the typical 20-40% seen in past downturns, given better topline, pricing, FX impact, and already enacted cuts. Consequently, we expect higher equity levels at year end than what could transpire in the interim, and net-net have Dec ‘23 index targets above current spot prices. Regionally, S&P500 risk-reward remains relatively unattractive, and we keep our call for convergence, out of the US and into International. We expect this to work in 2023 in USD terms as well, and not just in local currency as was the case this year. Within International markets, UK was our top pick for this year, and we keep our OW on FTSE100 in DM, and a pair trade of OW FTSE100 vs UW FTSE250. At a sector/style level, as we move through the year Cyclicals are likely to anticipate bottoming out in activity, perhaps some time in Q2. In the interim, while the earnings get reset and as PMIs decelerate further, we continue to stay away from the key Cyclicals such as Industrials, Chemicals, Construction, as well as from consumer plays – Autos and Retail. Within Defensives, we keep OW Telecoms, and add to Healthcare (UW to N). The sector did not do all that well in 2022, and could be a good compromise entering 2023. We also add to Utilities (N to OW), where SX6P performed in line with the overall market this year, but will likely have superior EPS growth in 2023, and benefit from peaking yields. Banks (OW to N) have outperformed the broader market this year by 700bp, and we take some profits, on lower yields and continued inversion of the yield curve ahead. We keep long commodity equities for now, despite an already strong run in 2022. Tech could tactically continue to stabilize if our call of peaking yields gains further traction, but it is unlikely to be a sustained leader – we keep our long-term OW Value vs Growth style stance.
 
This podcast was recorded on 30 November 2022.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4266987-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

All into Account: ‘The impact of zero day options ’ with Peng Cheng, Head of Big Data & AI strategies

Peng joins us to discuss zero day options: why they’ve become popular, who’s using them, and what impact they are having on markets.
 
Speakers: Thomas Salopek and Peng Cheng
 
This podcast was recorded on 22 November 2022.
This communication is provided for information purposes only. Institutional clients can view the related report at:
https://www.jpmm.com/research/content/GPS-4265817-0.pdf
For more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

Equity Strategy: Stalling USD and China reopening tactically support EM trade - we are still long Miners

Speaker: Mislav Matejka, Head of Global Equity Strategy.
 
Our key call at the start of Q4 was to look for the likely peaking out in bond yields, as we believed the disinflation phase has already begun. The potential turn in yields and in inflation has implications for equity P/E multiples, which could find the floor, and for the Growth/Tech part of the market to show a better trading performance. USD typically had an inverse correlation with equities, and any stabilization there would be a support. A peaking in Fed hawkishness would go a long way in taking the upside away from the USD. EM have this year lagged the DM, with the China drag the most notable. Even ex China, EM have underperformed the DM. The potential shift in USD fortunes would in particular be relevant for EM equities, as these historically had a strong inverse correlation to the USD. In addition, while the longer-term picture for China looks challenging given the structural growth downtrend, corporate decoupling and geopolitical uncertainty, the reopening is likely to be an important trade. This is especially the case given the extremely easy comps, such as near record low property starts. Policy responses are ramping up in order to set floors for real estate and credit, and sentiment is rock bottom. How to play this? China and Taiwan equities are down 30% ytd in USD terms, with Chinese P/E relatives at lows. Indirectly, European markets are the beneficiaries of any improvement in China prospects – FTSE100 remains our top country pick. We started this year OW on commodity sectors, and China reopening supporting the turn higher in activity indicators is welcome. Energy (OW) continues to have attractive valuations, even as our commodity team doesn’t see upside to Brent from here. We remain OW Miners in particular, looking for further outperformance on top of 25%+ so far ytd. Key metal inventories are rather low, the sector is a clear play on China reopening, weaker USD, and it still looks attractively priced, with very good balance sheets and a prospect of extraordinary capital return. Overall, we believe the EM risk-reward is tactically more positive given the above, but the longer-term outlook remains challenging, and our China economist is looking for a relatively soft 2023 growth outcome.
 
This podcast was recorded on 21November 2022.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4266987-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

All into Account: ‘Is the Metals rally done?’ with Greg Shearer, Head of Metals Research

Greg joins us to discuss the recent rally in Metals which appears to be fizzling. Factoring good news on China COVID and property policy, and a softer dollar, we assess whether current levels make sense.
 
Speakers:
Thomas Salopek, Global Cross Asset Strategy
Greg Shearer, Head of Metals Research
 
This podcast was recorded on November 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-426
For more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved

Equity Strategy: Multiples at market trough - International equities show more favourable tradeoff vs the US

Speaker: Mislav Matejka, Head of Global Equity Strategy.
 
We reiterate our call that equities are helped by the likely peaking out in bond yields and a turn lower in inflation, which will lend support to P/E multiples, as well as allow the Growth style/Tech to stabilize. This goes along with still record negative investor sentiment, light positioning, supportive seasonals into year end, China reopening and the likelihood of smaller than typical earnings contraction. In this note we address what P/E multiples were typically seen at market troughs. Looking at forward consensus P/Es in the past 4-5 recessions, for Eurozone the median was 9x, and the same for the UK - 9.1x. A few weeks ago we were very close to these levels, we touched 10.2x for Eurozone, a point away, and as low as 8.7x for UK, outright below. We do not think that European P/E multiples need to move lower than these levels. For the US, in the past 4 downturns the forward P/E multiples troughed between 10x and 14x, vs the latest reading of 17x, and the low reached in October of 15.6x. This is somewhat higher than the past lows recorded. Having said that, the P/E contraction in SPX so far, from cycle peak to recent low, of 7 points, ranks on par with past recessions. The important consideration for sustainable P/Es will have to be the inflation path. If inflation proves to be much stickier than we think, real yields will need to go higher, pushing P/E multiples lower. Our call remains that inflation will come off, and follow growth lower, as is typically the case. In relative terms, we note that International markets continue to trade at a significant discount to the US. Eurozone forward P/E relative to the US is at 0.67x, lower than what was observed during any of the past 4-5 crises, and even like for like, sector neutral, Eurozone trades at only 0.78x P/E of the US. The clear valuation advantage is one of the reasons why we do not believe Europe, and International stocks more broadly, are an easy short vs the US, even if one expects overall market downside. We started the year looking for regional convergence between International and the US equities, and believe this will continue to work, from here, likely even in USD terms, and not just in lc.
 
This podcast was recorded on 14 November 2022.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4261272-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.

All into Account: Pandemic savings cushion downshifting as cost of living rises

In this episode, we take a closer look at the health of the US consumer and household savings and cash balances. We highlight the risk that US households are reaching an inflection point as consumer confidence is on the decline, while year-ahead inflation remains stubbornly high at 7%. Although US household savings are likely to remain positive through the end of next year, our US economists see that the $2.1trn of excess savings relative to the pre-pandemic trend could be used up by the second half of next year. Excess savings supported US discretionary consumer spending and the JPMorgan Chase Institute finds that elevated cash balances during COVID have provided a cushion for spending and that for all income quartiles, real incomes are higher in 2022 than in 2019. More than two-thirds of respondents in our US equity retail cost of living survey expect to see their monthly core cost of living to rise by at least 10% in the coming months relative to costs of living at the start of the year.
 
Joyce Chang, Chair of Global Research
Chris Wheat, President of the JPMorgan Chase Institute
Daniel Silver, Senior US Economist
Matthew Boss, Head of J.P. Morgan’s Retail Equity Research

All into Account: Key takeaways from J.P. Morgan’s investor seminar hosted during IMF/World Bank Fall meetings

In this episode of All into Account, we discuss the key takeaways from the investor seminar that we hosted at the fall IMF/World Bank meetings, an investor seminar that we have been running for more than three decades. Policymakers sent a clear message that they see further pain still to come as central banks prioritize price stability over other objectives. The conference was also noteworthy for the discussion of the risks posed by financial tightening, which are in many ways trumping economic fundamentals. EM debt restructuring was discussed as a global concern but not a systemic one.  Please tune in to hear our other key takeaways.
 
Speakers
Joyce Chang, Chair of Global Research
Jahangir Aziz, Head of EM Economics Research
Jonny Goulden, Head of EM Local Markets and Sovereign Debt Strategy
Luis Oganes, Head of Global Macro Research
Jan Loeys, Head of Long-term Strategy
 
This podcast was recorded on November 2, 2022.
This communication is provided for information purposes only. Institutional clients please visit www.jpmm.com/research/disclosures for important disclosures. © 2022 JPMorgan Chase & Co. All rights reserved.