All into Account

The theme of High for Long (H4L) is supportive for our current Cross Asset views, where it’s long European duration, UW European stock, or OW USD vs lower yielding currencies with growth risk. More often than not, this theme has reinforced the conviction in our regional views as we assess to what degree H4L is durable in countries with more growth risk.   Speakers: Thomas Salopek, Global Cross Asset Strategy Fabio Bassi, Head of International Rates Strategy Prabhav Bhadani, Global Equity Strategist Patrick Locke, FX Strategist   This podcast was recorded on 09 Sept 2023. This communication is provided for information purposes only. Institutional clients can view the related report https://www.jpmm.com/research/content/GPS-4519192-0, https://www.jpmm.com/research/content/GPS-4519132-0, https://www.jpmm.com/research/content/GPS-4515282-0, https://www.jpmm.com/research/content/GPS-4519047-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Speaker - Mislav Matejka, CFA, Head of Global Equity Strategy As inflation rates are moving lower, taking out last year’s spike, the question is what the impact of this will be on corporate profitability. After all, instead of being hurt from higher input costs, it appears that most companies benefitted over the past two years, due to better mix and stronger pricing. European topline growth was a very high 14% in 2021, and as much as 24% in 2022, compared to historical median of 6%. 2022 EBIT margins for Europe are 330bp above 2019 levels. Defensives such as Healthcare, Staples and Utilities are the only sectors that are lower. There is a risk of reversal, especially if final demand stalls, potentially if PMI softness continues, and as supply chains have normalized. There is a very strong correlation between PPIs and global earnings delivery. Now, the latest oil rally could mechanically lead to stronger PPIs again. Historically though, when Brent moved up due to supply constraints, topline and margins of other sectors would not benefit, there would be demand destruction. Pent-up demand is behind us, as well as the ample post-COVID consumer liquidity, companies might not be in a position to pass on rising input costs as easily any more. In the report, we assess sectoral impacts, together with our analysts. We find a number of sectors to be at risk of a reversal in pricing power, such as Food and General Retail, Autos, Semis, Hotels, Airlines, Luxury/Sporting Goods and Construction Materials. On the other side, Insurance, Staples, Healthcare and Utilities could be less affected. Big picture, we see the Growth-Policy tradeoff as challenging into year-end. This is especially as the market is pricing in a no-landing scenario, with VIX at lows, credit spreads tight, and, until recently, a big rally in Cyclicals, but on the other side, the market expects 80bp of easing in 2H of next year, just ahead of US elections. This is an unlikely combination. We believe that Defensives will be having a bid into year end. We reiterate last week’s closing of two years’ worth of shorts in Real Estate, and advise tactically less negative call on China and on commodities – Mining (N) and Energy (OW), as they did poorly in 1H – CSI to bounce vs SPX and SX5E.   This podcast was recorded on 25 September 2023. This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4519132-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.  

Speakers: Thomas Salopek, Global Cross Asset Strategy Michael Feroli, Chief US Economist   The big news at the FOMC was the upward revision of the ’24 and ’25 dots, although Powell’s message seemed less hawkish.  Our views haven’t changed, i.e. we’ve seen peak funds and policy will be on hold until  around 3rd quarter of next year. We discuss how Fed will proceed in the event of a government shutdown, as well the signaling power of the yield curve.     This podcast was recorded on Sep. 20, 2023. This communication is provided for information purposes only. Institutional clients can view the related reports at  https://www.jpmm.com/research/content/GPS-4513430-0, for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Speaker - Mislav Matejka, CFA, Head of Global Equity Strategy After the strong 30%+ rally vs the US that started last September, Eurozone equities have lagged notably since May, by 14%. SX5E has not managed to make gains in absolute terms since February. On the positive side, given the poor relative run, Eurozone equities are looking quite cheap at present, and one could argue that the relative growth disappointments are likely closing in on their worst point, vs the US. Having said that, the absolute Growth-Policy tradeoff is still challenging for Eurozone, in our view. Activity has stalled, as we were fearing, and M1 lead indicator points to continued softness. On the other side, while ECB has indicated a pause, it might not be done, as inflation could stay sticky – core CPI still has a 5% handle. Eurozone EPS revisions held up well so far this year, but look set to turn sharply negative, which will take away some of the perceived valuation support. Finally, Euro equities are trading better than the macro outturns would suggest. We reiterate our downgrade to UW, made in May, staying cautious on the region, expecting it to have another leg of underperformance in the global context. This could come if services momentum slows more broadly, and if bond yields move down. Eurozone historically acted as a high beta on the way down vs other equity indices, especially the US. Within Europe, we have tactically a more positive call on commodity equities, Energy (OW), which tended to do well against the backdrop of the rollover in PMIs, as well as Mining, on which we were bearish earlier in the year, but would not be short any more given the big 30% underperformance since January. We are relatively more cautious on consumer and corporate plays, that have done well in 1H, such as Autos, Semis, Capital Goods and Luxury. We also stay cautious on Chemicals. We have been UW Real Estate for the last two years, but advise closing the short now. We are not excited about Eurozone Banks (N), and globally prefer Japanese Banks – we continue the pair trade of long Japanese vs Eurozone Banks – started in April, on the expectation of further move up in Japanese bond yields vs Eurozone bond yields.   This podcast was recorded on 18 September 2023. This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4514331-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Speakers: Thomas Salopek, Head of Global Cross Asset Strategy Eduardo Lecubarri, Head of SMidCap Strategy   We maintain a cautious stance with a deteriorating macro backdrop and margin pressure which challenge the rich consensus sell-side earnings estimates. Despite our bearish view, we can find SMidCap opportunities at the stock level, focusing on names which are under-valued, where pricing power and margins are more supportive.   This podcast was recorded on Sep. 13, 2023. This communication is provided for information purposes only. Institutional clients can view the related reports at  https://www.jpmm.com/research/content/GPS-4497659-0, https://www.jpmm.com/research/content/GPS-4508173-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Speaker - Mislav Matejka, CFA, Head of Global Equity Strategy China is the worst performing equity market ytd, out of larger EMs and DMs, down 6%, and 20% below January highs. At the same time, fresh stimulus newsflow is coming through and the Chinese-related indices could be due a bounce. Should one position for this? The new support measures might stabilize Chinese growth momentum, close to the 5% target, but could end up insufficient in helping drive any sustained upside. We note CNY is making fresh multi-year lows. Structural concerns remain significant, with the lack of confidence by the private sector, and the adjustment in real estate continuing. Demographics is a constraint; fiscal and monetary space to act is limited; and the risk of Japanese-style stagnation remains real, with a housing double dip the base case. We have been cautious on China over the past months, advising to fade stimulus-driven bounces. Our worry is that any rally might end up short-lived, and not lead to sustained medium-term gains, unless the real estate overhang reduces. With respect to the broader EM, EMs are this year underperforming DM by 11%, and even if one is to look at DM ex US, or EM ex China, EMs are struggling this year. While the Fed is likely to stop tightening, it could stay higher for longer. The EM FX index is making fresh lows. If USD keeps getting stronger, as we suspect, this was never a good backdrop for EM. In our global equity regional allocation, we stay cautious on EM vs DM. The EM basket has underperformed European indices ytd, and we stay away from it. Within it, while we are cautious on Miners, we note that they have already performed quite poorly, and, together with Energy which we are OW, can offer better relative value. In contrast, Luxury, Capital Goods, Autos and Semis did well in 1H, but are starting to stall, and there could be further weakness ahead. Defensives to work.   This podcast was recorded on 10 September 2023. This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4509399-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Broadening policy easing in China will do just enough to ensure growth comes in at the ~5% growth target, although in the absence of bazooka-like stimulus, restoring private sector confidence will be critical. Tingting, Tiffany and Soo Chong join us to give an update on China economics, rates, FX, and credit.   Speakers: Thomas Salopek, Global Cross Asset Strategy Tingting Ge, China Economist Tiffany Wang, Rates and FX Strategist Soo Chong Lim, Asia Credit Strategist   This podcast was recorded on 08 Sept 2023. This communication is provided for information purposes only. Institutional clients can view the related report https://www.jpmm.com/research/content/GPS-4498587-0 , https://www.jpmm.com/research/content/GPS-4506962-0 , and https://www.jpmm.com/research/content/GPS-4504178-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

In this podcast we discuss the recurrent food security crises, which bring new challenges as supply side shocks, geopolitical risks, climate change and biodiversity loss magnify vulnerabilities across the global food system. Moderate or severe food security now affect 30% of the global population, or 2.4bn people and food insecurity is the “new normal” with climate change and biodiversity loss pointing to recurrent crises. Three shocks tilt food prices to the upside—the breakdown of the Black Sea Grain Initiative (BSGI), new rice export restrictions and El Niño. Countries are bracing for ongoing food insecurity through increased stockpiling, seeking alternative supply routes and maintaining restrictions on food and fertilizer exports, and a number of countries are also accumulating stocks of food in reserve as buffers. Africa and EMEA are most exposed to wheat and rice shortfalls, while LatAm food supply is most exposed to weather-related shocks on food prices from El Niño. Speakers Joyce Chang, Chair of Global Research Nicolaie Alexandru, Head of EMEA EM Economics Research Toshi Jain, India Economist Vinicius Moreira, Brazil Economist Natasha Kaneva, Head of the Global Commodities Strategy Virginia Martin Heriz, Head of ESG Research Methodology and Integration Amy Ho, Strategic Research This podcast was recorded on September 6, 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.

Speaker - Mislav Matejka, CFA, Head of Global Equity Strategy Divergences keep opening up between the resilient equity markets and softening dataflow. Manufacturing PMI recovery, that was the consensus call for months now, remains elusive, and there are signs of services weakening, as well. There is no regional convergence coming through, with Europe disappointing further, and China staying mixed. SX5E had gone nowhere for half a year now, and has lagged the US since May, coincident with our downgrade to UW, but the relative performance of SX5E vs bonds has opened up a big gap with IFO, worth 20%+. How will it close? Also, even as Cyclicals finally stalled somewhat in August, the gap with PMIs remains significant. In a sense, bad is so far still seen as good, but this could change if labour market and consumer dataflow starts disappointing. Bond yields look set to move lower in that scenario, which will keep supporting our OW Growth vs Value call that we had on this year, at least in relative terms, but the bond proxy sectors should be logically getting a bid, too. Cyclicals stalled in August, keep fading them, in particular Industrials and Autos. This podcast was recorded on 03 September 2023. This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4502246-0  for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.

Speaker: Mislav Matejka, CFA, Head of Global Equity Strategy Month to date, in SXXP, Healthcare, Energy, Insurance, Staples and Utils are top sectors, a big change from earlier in the year, while the worst are Mining, Autos, Industrials, Travel & Leisure, Semis and Homebuilders. This reversal in leadership coincided with bond yields breaking out higher in August, from 4.0% to 4.30% for US 10 year. Can Defensives work if yields are going up, and should yields be going up in the first place? We think that bond yields’ move is to a good extent driven by inflation forwards moving up, US debt downgrade, and demand-supply worsening, and not just due to forecasters abandoning their recession calls. If the above remain the dominant drivers, then it is unlikely that high-beta stocks will benefit from this; i.e., bond yields might be rising for the “wrong reasons”. MSCI China made new ytd lows last week, down 20%+ from Jan high. This usually mattered for the broader Cyclicals complex, and not just for Miners. Lastly, Eurozone PMIs are meaningfully down since May, coinciding with our downgrade to UW. As we feared, the positive convergence, which was the consensus call over the past 3-4 months by forecasters, is not coming through, PMIs appear to be converging to the downside. Our lead indicators continue to point to no meaningful recovery in the near term. Despite recent Cyclicals stalling, the gap between PMIs and market internals, which we highlighted in our July Chartbook, is still significant. We do not see bond yields moving higher from here, at least not for the right reasons, China is likely staying under pressure, and PMIs are weakening. Put together, we think that Cyclicals can show another leg lower.   This podcast was recorded on 28 August 2023. This communication is provided for information purposes only. Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-4498704-0   for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2023 JPMorgan Chase & Co. All rights reserved.