All into Account

Equity Strategy: Feb Chartbook - Reiterate that long duration trade is to consolidate; USD could be bottoming out; Stay long Growth vs Value, US over Eurozone, OW Japan, cautious on China

Speaker: Mislav Matejka, CFA
So far this year, US is ahead of International, Growth is outperforming Value, large caps are again beating small - Russell2000 is outright down on the year 3%, and China continued struggling. We believe that this, ultimately unhealthy, high concentration and narrow leadership is set to continue until something breaks. To buy Value, beta and International stocks, one needs to see a reflationary backdrop, in our view, but we could have the exact opposite. The risk is of a disappointment on both sides of the Goldilocks narrative. Fed cuts might still be overdiscounted, despite the recent hawkish repricing, and the chances are that inflation picks up again, supply side driven, rather than due to stronger activity, freight rates have nearly tripled. We believe our long duration call made in October will have legs in 2024, but have argued at the start of this year that yields will likely consolidate near term, and the USD could be bottoming out. Regionally, we have preferred US to International stocks since May of last year, and don’t see that changing yet. We remain cautious on China, keep fading the bounces, and keep OW Japan – it remains our top regional pick. We are OW Growth vs Value, continuing our call from 2023, and reiterate our downgrade of Banks to UW in Q4 of last year, after three years of Banks beating the market.
This podcast was recorded on 04 February 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4619832-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2023 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

All into Account: Technical Strategy

Jason Hunter discusses the short-term technical setups or US Treasuries and equities following the Jan FOMC meeting. He also highlights the key resistance on Shanghai Composite, after the failed bounce leaves that market in a bear trend and vulnerable to further downside.
Speakers:
Jason Hunter, Head of Technical Strategy
This podcast was recorded on 1 February 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4612852-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

All into Account: ‘Will a Chinese Equity bounce blunt the Japanese Equity rally?’ with Wendy Liu, Chief Asia and China Equity Strategist and Rie Nishihara, Chief Japan Equity Strategist

We’ve seen a three-month period of underperformance for Chinese stocks and outperformance for Japanese stocks. Our positioning indicators based on futures and cross-border flows hint at flows from China to Japan. The recent China stimulus points to better days ahead for Chinese equities, and the worry was money flowing back from Japan would blunt the Japanese equity rally. Overall, we downplay the idea that a recovery for Chinese stocks must come at Japan’s expense.
 
Speakers:
Thomas Salopek, Head of Global Cross Asset StrategyWendy Liu, Chief Asia and China Equity StrategistRie Nishihara, Chief Japan Equity Strategist
 
This podcast was recorded on Jan. 30, 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4613215-0, https://www.jpmm.com/research/content/GPS-4609156-0, and https://www.jpmm.com/research/content/GPS-4614086-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.
 

Equity Strategy: What is needed for Eurozone to start outperforming again? We stay OW Growth vs Value

Speaker: Mislav Matejka, CFA - Head of Global Equity Strategy
The last positive spell for Eurozone was between Sept ’22 and May ’23, when it outperformed S&P500 by as much as 32%, in USD terms. We cut Eurozone to UW in early May of last year, and the question is what can help Eurozone to deliver another leg of outperformance. It certainly screens cheap vs the US, at a 15% greater discount than typical on a sector-neutral P/E metric, and is likely underowned, as seen in 40 weeks of outflows over the last year. A more constructive China backdrop would definitely be a help for Eurozone to take the lead. As MSCI China is down as much as 30% vs a year ago and is likely a fully consensus UW everywhere, the current short squeeze could continue for a bit longer. Having said that, from a fundamental standpoint, we remain bearish on the region, for now. Another factor is the style leadership. We stay OW Growth vs Value, a position we held through 2023. As long as the market stays narrow, Tech driven, the US is likely to have the upper hand vs Eurozone. We note that EPS revisions in Europe remain worse than in the US. Finally, USD direction matters. The Q4 USD downmove might be finishing as the Fed cuts might have been overdiscounted in the near term. If USD is bottoming out, it would be hard for Eurozone to work. Backtested, Eurozone was actually the worst-performing region in times of USD strength, and Japan was the best international market – Japan remains our key regional OW for 2024. What to buy/sell in Europe? From the negative side, we highlight: we are still UW Chemicals and UW Autos, as of Q4 UW Hotels and Airlines, and have in November turned bearish on Banks. On the buy side, we have OW Utilities, upgraded Healthcare in November. We double upgraded Real Estate to OW last October, and finally, we are still bullish Aerospace & Defense.
 
This podcast was recorded on 29 January 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4609199-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

All Into Account: ‘Inflation’s impact on EM Stocks’ with Pedro Martins, Chief EM Equity strategist and David Aserkoff, Head of CEEMEA Equity Strategy

Speakers:
 
Thomas Salopek, Global Cross Asset Strategy
 
Pedro Martins, Chief EM Equity strategist
 
David Aserkoff, Head of CEEMEA Equity Strategy
 
 
This podcast was recorded on January 25, 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4609169-0, https://www.jpmm.com/research/content/GPS-4602980-0, 
https://www.jpmm.com/research/content/GPS-4605609-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.
 

All into Account: ‘Time to be more negative on HG spreads after the strong rally’ with Eric Beinstein, Head of US Credit Strategy

HG bond spreads at 110bp are just 2bp wide to the post-GFC tightest level, so Eric joins to shed some light on why spreads are so tight. While our views haven’t materially changed, the market moves have put us well though our YE spread forecast of 125bp, so we consider which catalysts can trigger widening. A disappointing earnings season may prove to be the near-term test for HG, which we see as priced to perfection.
 
Speakers:
Thomas Salopek, Head of Global Cross Asset StrategyEric Beinstein, Head of US Credit Strategy
 
This podcast was recorded on January 22, 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4602424-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.
 
 

Equity Strategy: Q4 Preview - the downtrend in earnings momentum is not changing

Speaker: Mislav Matejka, CFA - Head of Global Equity Strategy
 
For Q4 results, the activity momentum has generally decelerated in the quarter, which calls for a sequential weakness in earnings delivery. The good news is that the hurdle rate has come down aggressively, for S&P500 from 10% to only 2% yoy. Given this, the actual results are likely to yet again beat the much lowered estimates. The problem is that the market really needs some net earnings upgrades to advance from current levels, not just the beats vs heavily lowered projections, in our view. This is because the sentiment and positioning is stretched, valuation multiples have rerated, and the key driver of the Q4 rally, the move lower in bond yields, is likely over for the time being. Big picture, 2024 EPS projections keep coming down, in most regions. This is unlikely to change, we see risks to both pricing and to volumes for this year, in addition to what is generally a tough hurdle rate for most corporates - profit margins are elevated vs typical. At subsector level, Semis, Autos and Banks margins are at record highs, and could weaken. Chemicals margins are subdued, but we fear they could stay weak - we keep our long held UW view on the Chemicals sector. In aggregate, COVID distortions appear to have benefited Cyclicals more than the Defensives, and this is where the unwind could happen. We stay OW Growth vs Value, continuing last year’s style preference, keep OW US vs Eurozone, and believe that Defensives are set to perform better this year.
 
This podcast was recorded on 21 January 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4604423-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2023 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

Equity Strategy: Is the long duration trade done?

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
The question is whether the move lower in bond yields is over for the time being, and can it resume further down the line without a clear bout of activity weakness materializing? We called last October to position for the rollover in bond yields, but post the sharp fall of 100bp in 3 months, a pause is likely. Central banks rate projections have already moved substantially, now pricing in a cumulative 150-170bp of cuts by the Fed and ECB over the next 12 months, and markets digested a raft of benign inflation prints. Big picture, we believe that the long duration call will stay relevant for 2024, but the near-term stabilization could happen due to the exhaustion in negative convexity impact, on potentially more longer-dated government bond issuance, and along with likely some more mixed inflation prints ahead. We are unlikely to see another leg lower in bond yields near term unless or until there is a clear deterioration in activity dataflow. Now, what could be the implications of this for equity markets? In November and December equities took the fall in bond yields as an overwhelming positive, fueling a risk-on market rebound. Cyclicals outperformed Defensives, with the exception of Real Estate and Utilities; however, the typical defensive bond proxies significantly lagged. If yields stall near term, this likely stalls the rally too, and crucially we do not expect that the decidedly one-sided interpretation of why bond yields have fallen will continue. This is especially if we do see some weakening in consumer dataflow, which was solid to date – most recently US ISM services employment component fell sharply. If the consumer setup changes, then Defensive names could have a catchup, especially as their valuations vs Cyclicals are now attractive, and as Cyclicals have moved further away from activity dataflow. We note that Healthcare, Telecoms and Staples have started the year on a stronger note in both the US and in Europe, and we expect this to continue.
This podcast was recorded on 14 January 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4600086-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

All into Account: Technical Strategy: The short-term setups for most markets favor further mean reversion after the sharp fourth quarter trends

Jason Hunter discusses some of the more interesting technical setups and signals from his recent publications and ahead of tomorrow’s CPI report.
This podcast was recorded on 10 January 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4588098-0, https://www.jpmm.com/research/content/GPS-4596708-0, https://www.jpmm.com/research/content/GPS-4594796-0, https://www.jpmm.com/research/content/GPS-4596573-0, for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.

Equity Strategy: January Chartbook

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy
As of end October ‘23, the average stock in S&P500 was down on the year, with SPW at -5%. A lot has changed, courtesy of the November-December rally, and equity markets are now showing overbought conditions, with sentiment moving into complacent territory. This can be seen in high RSIs, elevated Bull-Bear, VIX near lows, tight credit spreads, as well as in the current S&P500 P/E at 20x. Importantly, while a year ago risky assets were fully pricing in a recession, and economists unanimously agreed with that, now the picture is quite different, recession probabilities are currently near the lows of the range, and most macro forecasts are hopeful. This might be too optimistic. Our key call was to go long duration, we advised last October to position for the rollover in bond yields, and while we see this call having legs in 2024, there is likely to be some payback given the sharpness of the move over the past 3 months. Yields could be consolidating near term, and have next leg lower only when activity dataflow shows more clear deterioration. Crucially, while market interpreted falling bond yields since Oct as solely a positive development, we do not think that this will sustain through the year. Lower yields could end up signaling weaker EPS delivery ahead, on softening pricing, sequential activity slowdown and profit margin compression. Bottom line, the risky assets have started to fully embrace the macro combination of central banks easing on lower inflation, but at the same time resilient growth and continued record profitability – this might end up contradictory. All this suggests a much less attractive risk-reward than what would at face value lower bond yields/central banks easing and up to now resilient growth suggest. Healthcare, Telcos, Energy and Utilities have started the year on a positive note, and we think this may continue.
This podcast was recorded on 08 January 2024.
This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4596811-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures.
© 2024 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P. Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party. It is permissible to use J.P. Morgan Data for internal business purposes only in an AI system or model that protects the confidentiality of J.P. Morgan Data so as to prevent any and all access to or use of such J.P. Morgan Data by any third-party.