Each quarter, the J.P. Morgan Multi-Asset Solutions team holds a two-day-long Strategy Summit where senior portfolio managers and strategists debate current asset allocation views and establish key global themes. Those views will be reflected across multi-asset portfolios managed by the team. Our 3Q 2016 Asset Allocation Views represent the output of this meeting.

3Q 2016. Asset Allocation Views

Key findings from the Multi-Asset Solutions Strategy Summit

Watch John Bilton, Head of Multi-Asset Strategies discuss highlights from the recent Strategy Summit including market returns expectations, preference of carry over capital growth, quality over apparent cheapness, and relative value over directional bets.

• We expect growth to improve in the second half of the year. Nevertheless, the level of growth is too low and valuations too high to expect outsized asset returns.

• This is reflected by taking a quality bias in all assets. We remain neutral on stocks, duration and commodities; we maintain our credit overweight but diversify further from high yield into investment grade.

• The path of U.S. rates and tone of Federal Reserve comments are critical drivers of sentiment; diversification and an active approach remain key portfolio goals.



The combination of improving financial conditions, better growth and normalizing inflation supports risk assets. However, this should be balanced against full valuations and the modest pace of growth. We remain more confident on economic outcomes than on asset market outcomes in developed markets. As a result, we maintain a cautious allocation, with a neutral view on stocks, duration and commodities; an overweight to credit; and a small underweight to cash.

We take an “up in quality” bias in all assets, continuing to prefer the U.S. to other developed equity markets, trimming our high yield OW in favor of investment grade and maintaining some preference for large cap over small cap and European over Japanese equity.

If the economic outlook for developed markets is more certain than their asset market returns in 2H16, the reverse was true for emerging markets (EM) in 1H16. Despite the rally in EM assets, structural flaws in many emerging economies remain unresolved. Ultimately, the path of the U.S. dollar will dictate whether asset market trends can continue to outpace economic trends in emerging markets. We see the dollar rising modestly in trade-weighted terms in 2H16 but more noticeably against EM currencies, so for the moment we maintain our UW to emerging markets. Our portfolio is designed for a “low growth but no recession” world.

4d03c02a8003777e











Download PDF


John Bilton

 








Head of the Global Strategy Team for the Multi-Asset Solutions Group.




Featured Funds

JPMorgan Funds—Global Bond Opportunities Fund

 

Broaden the borders of your bond portfolio. The Fund provides flexible, high-conviction exposure across more than 15 fixed income sectors and 50 countries.

More about this fund






John Bilton


 

Head of the Global Strategy Team for the Multi-Asset Solutions Group.


Featured Funds 

JPMorgan Funds—Global Bond Opportunities Fund

 

Broaden the borders of your bond portfolio. The Fund provides flexible, high-conviction exposure across more than 15 fixed income sectors and 50 countries.


More about this fund