Global Asset Allocation
03 March 2017
Global Asset Allocation
Global Asset Allocation
Jan Loeys AC
(1-212) 834-5874
jan.loeys@jpmorgan
J.P. Morgan Securities LLC
John Normand
(44-20) 7134-1816
john.normand@jpmorgan
J.P. Morgan Securities plc
Nikolaos Panigirtzoglou
(44-20) 7134-7815
nikolaos.panigirtzoglou@jpmorgan
J.P. Morgan Securities plc
Mika Inkinen
(44-20) 7742 6565
mika.j.inkinen@jpmorgan
J.P. Morgan Securities plc
Gregory C. Shearer
(1-212) 834-2039
gregory.c.shearer@jpmorgan
JPMorgan Chase Bank NA
Lixin Bao
(1-212) 834-4565
lixin.bao@jpmorgan
J.P. Morgan Securities LLC
Jigar Vakharia
(91-22) 6157-3281
jigar.r.vakharia@jpmorgan
J.P. Morgan India Private Limited
See page 56 for analyst certification and important disclosures.
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See page 56for analyst certification and important disclosures, including non-US analyst disclosures.
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Outlook
Our macro outlook is now one of a world economy cruising at a pace of
only 0.2% above its potential rate, with balanced risk. This implies only
slight inflation pressure and no reason for central banks to get into a hurry,
even as the Fed is about to move on its third hike this cycle. A neither-too-
hot-nor-too-cold economy raises the odds of a much longer-lived global
expansion, even as the current one is already longer than average.
Expectations of comprehensive US tax reform and stimulus this year are
likely to get disappointed, but so are fears of strong protectionism
measures by the new US Administration.
Strategy
We rename our Growth Strategy a Stable GrowthStrategyto focus
attention away from acceleration to stability and low macro volatility.A
longer cycle means we should stay OW equities. But without growth
upside surprises or policy stimulus, we should probably no longer be as
aggressively long equities as before. And macro stability should rekindle
interest in higher-income assets away from relying largely on capital gains
from improved growth.
Most income assets have somewhat lower yields than a year ago, when we
also went long the Income Strategy. One exception is EM local bonds that
got hurt after Nov 8 with other EM asset classes on fear of a US trade war.
By now, most investors seem UW EM, there is superior momentum and
value in EM, but no strong macro support to get in. We thus go Neutral
EM equities, but long EM local bonds, in USD, to gain income.
Asset Allocation
We take part profit on our aggressive EQ OW, moving it back from +15%
to +10%, using the money to invest in Commodities, at +5%, focused on
Indu
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