Over the weekend global asset allocation team of J.P Morgan had the following view:
• Economics –– Forecasts of weaker Q4 global growth are on track
• Asset allocation –– Our overweights in EM, HY and UST duration, and short USD are consensus trades, but aside from USTs are not yet near a bubble
• Fixed Income –– Fed easing combined with ECB inaction should see US Treasuries outperform German Bunds.
• Equities –– Positive momentum and the prospect of more business-friendly policies post US mid-term elections should sustain the rally into November.
• Credit –– Overweight CLO mezzanine and subordinates in both US and Europe, with over 10% expected return over next 6 months.
• FX –– INR and KRW are our preferred longs vs USD in Asia.
• Commodities –– Pace of Chinese crude oil imports is increasing. Stay long oil.
Click on chart to enlarge, courtesy of J.P.Morgan.
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