All into Account

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 Strategy Wendy Liu, Chief Asia and China Equity Strategist Rie 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.  

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.

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.  

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 Strategy Eric 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.    

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.

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.

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.

Mislav Matejka, Head of Global Equity Strategy, discusses the changes in the stock market, the potential consolidation of bond yields, and identifies sectors that have started the year positively.

Thomas Salopek, Head of Cross Asset Strategy, and Marko Kolanovic, Chief Global Markets Strategist, along with other analysts, discuss the outlook for 2024, including topics such as the impact of reopening in China, potential economic slowdown, skepticism towards inflation decline, underperformance of active investors, bullish outlook on Japan, and investment recommendations such as gold and silver.

The global housing market is facing a supply/demand imbalance with divergent prospects across regions, but the housing affordability crisis is a common denominator. In this video and podcast, we discuss current market conditions in the global housing market. Oversupply in China and commercial real estate contrasts with the lack of supply in the US housing market, which is essentially frozen. US housing affordability is at its worst in 41 years, while Japan, Italy and Spain are the only G20 developed market countries with ratios of home prices-to-income below their historical averages. China and the UK stand out as facing the greatest challenges. In China, housing faces the risk of a double-dip, and financial risks from the property sector remain high despite modest policy support. The UK housing market is most vulnerable due to shorter-term mortgage structure and resets.   Speakers Joyce Chang, Chair of Global Research John Sim, Head of Securitized Products Research Michael Rehaut, Head of Homebuilders and Building Products Equity Research Abigail Suarez, Head of Neighborhood Development at JPMorgan Chase Haibin Zhu, Chief China Economist Meghan Kelleher, International Securitization Research Chong Sin, US Commercial Mortgage-Backed Securities Research   This podcast was recorded on November 28, 2023. This communication is provided for information purposes only. Institutional clients please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.