America First Is a Winning Strategy, JPMorgan Says
2018-10-06 14:23:10.345 GMT
By Joanna Ossinger
(Bloomberg) -- America is the way to go.
Markets continue to be driven by “uniquely American”
factors such as strong activity data, a central bank that’s on
the path to being restrictive and foreign policy aimed at
systemically important countries, JPMorgan Chase & Co.
strategists led by John Normand wrote in a note Oct. 5. That’s
despite such factors as the long age of the expansion and an
“unusually protracted” Federal Reserve rate-hike cycle.
While the U.S. has calmed some waters with developments
like the U.S.-Canada-Mexico trade deal, “it’s too hopeful to
backburner geopolitics into year-end” given the tensions with
China and Iran.
Related momentum trades continue to work, including
shorting Treasuries and underweighting some EM assets while
owning the dollar, U.S. equities, U.S. cyclicals and oil assets,
the Normand team said.
Major mean-reversion trades -- bets that a relationship
will tend to revert back to its average level over time -- “will
struggle to deliver this fall,” the strategists wrote. Those
include:
* Tighter Bund-Treasury spread
* Lower U.S. dollar
* Outperformance of emerging markets versus developed ones
* Defensive stocks over cyclicals
* Value shares over growth
“We hold some of these value trades, but half the portfolio
remains U.S.-centric,” the report said.
JPMorgan had already predicted an all-out U.S.-China trade
war, writing in a note Sept. 28 that it expected 25 percent U.S.
tariffs on all Chinese goods in 2019. It subsequently cut
Chinese stocks to neutral from overweight. The bank in April
predicted that oil would rise as the U.S. sanctions against Iran
drew nearer.
“The best catch-all theme is still the hackneyed America
First pattern,” the strategists said, “where the U.S. leads all
other business and central bank cycles but also kindles almost
every geopolitical fire.”
To contact the reporter on this story:
Joanna Ossinger in New York at jossinger@bloomberg.net
To contact the editors responsible for this story:
Chris Nagi at chrisnagi@bloomberg.net
James Ludden, Bob Brennan
2018-10-06 14:23:10.345 GMT
By Joanna Ossinger
(Bloomberg) -- America is the way to go.
Markets continue to be driven by “uniquely American”
factors such as strong activity data, a central bank that’s on
the path to being restrictive and foreign policy aimed at
systemically important countries, JPMorgan Chase & Co.
strategists led by John Normand wrote in a note Oct. 5. That’s
despite such factors as the long age of the expansion and an
“unusually protracted” Federal Reserve rate-hike cycle.
While the U.S. has calmed some waters with developments
like the U.S.-Canada-Mexico trade deal, “it’s too hopeful to
backburner geopolitics into year-end” given the tensions with
China and Iran.
Related momentum trades continue to work, including
shorting Treasuries and underweighting some EM assets while
owning the dollar, U.S. equities, U.S. cyclicals and oil assets,
the Normand team said.
Major mean-reversion trades -- bets that a relationship
will tend to revert back to its average level over time -- “will
struggle to deliver this fall,” the strategists wrote. Those
include:
* Tighter Bund-Treasury spread
* Lower U.S. dollar
* Outperformance of emerging markets versus developed ones
* Defensive stocks over cyclicals
* Value shares over growth
“We hold some of these value trades, but half the portfolio
remains U.S.-centric,” the report said.
JPMorgan had already predicted an all-out U.S.-China trade
war, writing in a note Sept. 28 that it expected 25 percent U.S.
tariffs on all Chinese goods in 2019. It subsequently cut
Chinese stocks to neutral from overweight. The bank in April
predicted that oil would rise as the U.S. sanctions against Iran
drew nearer.
“The best catch-all theme is still the hackneyed America
First pattern,” the strategists said, “where the U.S. leads all
other business and central bank cycles but also kindles almost
every geopolitical fire.”
To contact the reporter on this story:
Joanna Ossinger in New York at jossinger@bloomberg.net
To contact the editors responsible for this story:
Chris Nagi at chrisnagi@bloomberg.net
James Ludden, Bob Brennan