• Economics: Activity data are tracking our forecast of growth close to potential.
• Asset allocation: QE boosts investor confidence. Add risk.
• Fixed income: QE on the horizon supports core bond markets, but look for Australia and Canada to decouple.
• Equities: Negative pre-announcements point to a worse EPS outcome in 3Q relative to 2Q, but seem largely priced in. Short covering has further to go.
• Credit: Medium-term strategy remains long credit, favoring EM over DM, corporate over state, and US over Europe.
• FX: Add to USD shorts.
• Commodities: Much stronger-than-expected demand for crude oil leads us to raise price forecasts, from $75 to $81 average for 4Q. Go long crude oil.
Tuesday, September 28, 2010
J.P. Morgan: Central Banks Are Boosting Confidence
Is this another "In Ben we trust" story at J.P. Morgan? Current markets view suggest to add risk as short covering in equities is supposed to be good investment strategy: