Market Insights
What a slowing China means for investors
There has been much talk recently about whether the Chinese economy faces a hard landing. In this paper, we explain why we continue to believe that a soft landing is the most likely scenario, and look at the implications of this more gradual slowdown in China for investors.
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Japan: Shattering the preconceptions
After the disappointments of the past ten to 15 years, many equity investors are underweight Japan, or do not hold it at all. However, changes in the global economic backdrop, the Japanese macro environment and the behaviour of financial markets mean it may be time to think again. In this paper, we address the preconceptions and explain why investors should not overlook Japan.
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Investing in US equities
The US stock market is benefiting from attractive valuations, loose monetary and fiscal policy, and relatively strong economic growth compared to Europe and Japan. While the American consumer remains cautious, the corporate sector has begun investing for the next upturn in growth. As a result of these factors, the US looks likely to outperform other major developed stock markets in 2012 and possibly beyond.
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Emerging Markets: Value awaiting momentum
In this paper, George Iwanicki, emerging market macro strategist, discusses the
global backdrop and looks at how it relates to emerging markets. He then considers
a special topic within the asset class, that of over investment, using Brazil and
China as case studies. George also focuses on some of the tactical opportunities
that have become exciting within emerging market equities.
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Asia-Pacific markets in the Year of the Dragon
As we move into the Chinese New Year, Ted Pulling, the new head of our Pacific Regional
Group, takes a look back at 2011 and gives his views on what may lie ahead for investors
in the Year of the Dragon.
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Emerging market debt outlook
In this paper, Pierre-Yves Bareau assesses the overall outlook for emerging market
debt in 2012. He also looks at the individual outlooks for each of the three main
sub-asset classes – external sovereign debt, local currency debt and corporate debt
– and identifies the markets and sectors that offer the best prospects in the year
ahead.
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Review of the year and outlook for 2012
Investors have had a difficult year. With stubbornly high inflation to contend with
in the eurozone, the UK and the US, weak macroeconomic data and a rise in market
volatility, achieving a real return on capital has been a challenge. Global Strategists
Dan Morris and Tom Elliott examine the themes behind the fall in growth expectations
in 2011, and explore the outlook for 2012.
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Global bond outlook: Full circle, but which direction?
Low levels of economic growth and high levels of debt are creating significant opportunities
in global bond markets. Nick Gartside, international chief investment officer for
fixed income, explains how the global economy has come full circle and why global
bonds may continue to provide investors with attractive returns in the coming years.
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The Euro crisis: Origins, solutions and investor options
In this paper, Tom Elliot, global strategist, puts into context the many individual
components of the eurozone debt crisis and discusses investment ideas related to
the current environment.
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Emerging markets strategy: Can emerging markets do it again?
In this paper, George Iwanicki, emerging market macro strategist, re-examines the
decoupling story and the consequences for commodity prices (and commodity-exporter
currencies) of an extended zero interest rate policy.
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A new fiscal world order: implications for investors
Recent macro events– the US downgrade, the debt-ceiling resolution and Europe’s
fiscal challenges – mark a turning point for the global economy and markets and,
in our view, signal a new fiscal world order. Chief Markets Strategist Rebecca Patterson
discusses the new fiscal world order.
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Eurozone crisis: The latest developments
Renewed market instability at the beginning of August reflects investor concerns
that measures taken by the eurozone to end the peripheral debt crisis do not go
far enough. This paper looks at what can be done to stop the crisis spreading.
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US debt crisis: After the downgrade
In this paper, Nicholas Gartside, international chief investment officer for fixed
income, and David Shairp, global strategist, discuss the impact of the US debt crisis
and credit rating downgrade on the outlook for markets and for the economy.
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ETFs Weighing the risks
The dramatic growth in ETFs has led regulators to consider more carefully the systematic
risks ETFs may pose. We offer a summary of recently published papers highlighting
the concerns.
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Japan’s debt burden
The huge cost of disasters that struck Japan in March has refocused the attention
of investors. We consider the cost of rebuilding and the long-term fiscal outlook
for Japan.
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Strategic bond investing: Solutions for a new bond world
The bond world has been turned upside down. Developed world government bonds appear
to offer little long-term value while emerging market debt and high yield bonds
are increasingly providing the driving force behind bond returns.
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European equities: A long-term perspective
European equities have outperformed the rest of the world over the long term, thanks
to the innovative products produced by the region’s dynamic corporate sector. In
this paper, Stephen Macklow-Smith applies a long-term perspective to European equity
investing, looking at the unique factors that have powered the region’s outperformance.
He also assesses earnings growth and valuations, and discusses the themes currently
shaping the markets.
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Emerging markets strategy: Evaluating inflation and commodities
With the recent momentum in earnings estimates for developed markets now appearing
to have come to an end, George Iwanicki, emerging market macro strategist, examines
the value story for the emerging markets asset class against the current global
cyclical backdrop and re-caps on the inflation issues that have occupied investors
over recent months. In the context of the commodity volatility experienced over
the last few months, George also digs deeper into the commodity-currency nexus and
examines how a super cycle in commodities is interplayed with currencies.
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Japan’s debt trap: Who’s in the trap?
The cost of rebuilding following the earthquake and tsunami in Japan in March, and
renewed concerns about the ability of Greece to repay its debt, have turned the
attention of investors once again to the debt burden in Japan. Yoshi Sakakibara,
Economist, and Dan Morris, Market Strategist, discuss the current fiscal situation
in Japan and the potential impact of financing the reconstruction.
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Greece: restoring the economy
Greece’s sovereign debt crisis is once again taking centre stage. Several options
are under discussion to provide further support for Greece, including a new aid
package, an updated set of fiscal measures and a debt restructuring programme. Although
the situation is still evolving, we take a look at what solutions may be feasible.
In addition, we try to establish what effect a debt restructuring may have on the
European and global economy.
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China: an update on the market and government policy
After disappointing performance in 2010 and the first quarter of 2011, Chinese equities
have only recently started to outperform regional markets. In this paper, we aim
to investigate the reasons for the poor performance in 2010 and to analyse the implications
of recent government policy announcements on the stock market. We believe that after
the recent focus on developed markets, the investment case for Chinese equities
looks appealing once again.
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Restoring Japan: An early macro assessment
Yoshito Sakakibara, an economist in our investment research team in Tokyo, presents
an initial macro assessment of the Tohoku earthquake and indicates the important
signals for investors to look out for on Japan’s path to recovery. Based on this
assessment, Yoshito also considers appropriate investment strategies going forward.
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Aftershocks: Japan and world markets after the disaster
The outlook for investors has changed dramatically over the last few months. At
the end of 2010, expectations were for continued recovery in developed economies.
The principal concerns were inflation in emerging markets and lingering unease over
the eurozone sovereign debt crisis. Today we face new worries about sustained high
oil prices and nuclear radiation in Japan. In this paper, we will attempt to put
these issues in perspective and suggest how investors can best position their portfolios.
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The 2011 UK Budget: hopefully boring with the promise of tax reform
A boring 2011 budget that keeps to the spending and revenue framework announced
last year would be desirable. Any sense that the government is spending recent stronger-than-expected
revenues is in danger of being interpreted by the bond market as a lack of commitment
to the long-term goal of eliminating the budget deficit in 2015-16. The danger that
growth and employment levels come in below those used in the Treasury’s forecasts
suggest that growth-friendly measures on the supply side would be appropriate. The
government’s own initiative to simplify the tax code, given the burden created by
1,042 reliefs and allowances, may start to bear fruit.
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Why Invest in the technology sector?
The tailwinds behind the technology sector are building, which could lead to strong
earnings growth and positive stock returns in 2011 and 2012. There are four major
themes that point to strong fundamentals within the technology sector: the return
of IT spending, increasing demand for mobility, improving global economy leading
to longer-term capital expenditures within technology and valuations.
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Japan outlook: Will Japanese equities jump in the Year of the Rabbit?
Japanese equities have long been unloved and under-owned. In this paper, we discuss
the factors that may affect the Japanese equity market in 2011 and why Japan is
well positioned to benefit from a global cyclical upturn.
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An (oil) spot of bother: Winners and losers from oil’s surge – February 2011
The revolution shaking north Africa and the Middle East may affect far more people
than the region’s citizens. The rapidly climbing price of oil will create both winners
and losers across the world. We examine the impact to date on equity and bond markets
and consider what the future may hold.
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The Bank of England walks the line
Following the release of January inflation data and hawkish comments in Mervyn King’s
letter to the Treasury, market commentators rushed to forecast a series of interest
rate rises, beginning in May, that would take the UK base rate to 1.25% by the end
of the year. However, the statement accompanying the Bank of England’s quarterly
inflation report suggested this reaction may have been too hasty – and we’re inclined
to agree.
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Asia 2011 Outlook – January 2011
Asian markets enjoyed a ‘Goldilocks’ economic scenario in 2010 that helped them
outperform developed markets over the year. As we enter 2011, despite various headwinds
to growth, the region still has plenty of upside potential. In this paper our Asian
investment specialists review the region’s markets in 2010 and explain why they
believe Asia will continue to deliver in 2011.
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Emerging Market Debt: 2011 Outlook – January 2011
Emerging market (EM) countries enter 2011 in a stronger economic and fiscal position
than they did in 2010. Since the financial crisis, emerging markets have driven
global economic growth, compared to the sluggish growth experienced by developed
markets. EM economies have expanded at above trend growth levels through 2010, allowing
most EM central banks to start to normalise policy rates, stemming the tide of excess
liquidity. We expect this dichotomy in growth between developed and emerging markets
to persist throughout 2011. However EM growth is likely to be slower compared to
2010.
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Emerging Markets Strategy – December 2010
Emerging markets macro strategist George Iwanicki takes a closer look at the implications
of sluggish growth and quantitative easing in the developed world for emerging markets.
George presents his constructive view on the asset class, focusing on valuations
and flows as well as highlighting selective tactical investment ideas at the country
level.
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European equities: Perception versus reality
European equities have delivered strong returns in recent months – and have outperformed
the world over the past two decades – yet the region continues to receive bad press
as an investment destination. In this paper Stephen Macklow-Smith looks at the mismatch
between perception and reality, and explains why the strength of the region’s corporate
sector means it is well positioned to continue generating attractive returns in
the coming years.
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Is inflation a problem in China?
After a surprise rise in CPI in October, investors have become concerned about inflationary
pressures in the Chinese economy. In this piece, we look at the drivers of Chinese
inflation, examine the policy response so far and explain why we believe inflation
will remain under control in the short to medium term.
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European equities: Perception versus reality
European equities have delivered strong returns in recent months – and have outperformed
the world over the past two decades – yet the region continues to receive bad press
as an investment destination. In this paper Stephen Macklow-Smith looks at the mismatch
between perception and reality, and explains why the strength of the region’s corporate
sector means it is well positioned to continue generating attractive returns in
the coming years.
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The attraction of emerging market currencies - October 2010
Emerging market currencies are coming under increasing scrutiny. In this paper Amit
Tanna, a senior portfolio manager in J.P. Morgan Asset Management's currency group
based in London, argues that many emerging market currencies (particularly in Asia)
could outperform in the coming months, driven by rising inflation, higher interest
rates and growing pressure from western policymakers.
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Emerging markets strategy: Lingering macro uncertainty and opportunities - October 2010
Emerging markets macro strategist George Iwanicki takes a closer look at the outlook
for emerging market equities given ongoing global macroeconomic uncertainty. Focusing
on earnings and valuations, the improvement in capital discipline, and tactical
investment ideas, this paper shows why emerging market equities remain an attractive
choice for long-term investors.
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Germany and the euro - October 2010
Some economists suggest that those eurozone countries which run current account
surpluses and relatively strong government finances, particularly Germany, helped
to create and are sustaining the sovereign debt crisis. Tom Elliott looks at this
argument and at another possible explanation: the lack of a common eurozone fiscal
and economic policy.
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The US economic recovery and the role of the consumer - September 2010
We are now over a year into a slow but clear US economic recovery. In this paper,
we look at how weak consumption has contributed to a below par recovery and ask
whether the US consumer will be able to take up the slack as the contribution from
more cyclical factors begins to fade.
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A sharper view
Quarterly market outlook from J.P. Morgan Asset Management
Download the quarterly market outlook