This year has been marked by powerful rallies in the stock and bond markets, thanks to the dovish policy tilt by central banks.
According to JPMorgan, the double-digit gains are unlikely to be repeated in the second half of the year.
They outlined four themes that will drive markets into 2020.
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The trade war that’s threatening to upend the global economy has indirectly become a boon for markets this year.
Amid the tensions, investors piled into the safety of bonds and created a powerful rally in fixed income.
The stock market wasn’t left out. Major central banks shifted from slowly raising interest rates to promising rate cuts, and helped send stocks to all-time highs.
But this Goldilocks situation that central banks have created does not mean the coast is clear for the rest of the year, according to JPMorgan.
“With many equity and fixed income asset classes posting double-digit returns for 1H19, we recommend some defensive trades focused on preserving the strong performance YTD,” the firm’s cross-asset strategists said in their midyear outlook.
They continued: “We expect low single-digit returns for most asset classes for the remainder of the year with EM FX experiencing modest losses, while Japan equities (Topix) is the only asset class that we forecast as delivering an even stronger performance in 2H19 compared to 1H19.”
JPMorgan’s strategists further drilled down four themes that they say will influence markets for the rest of the year and into 2020.
1. President Trump’s unfinished trade, technology, and budget wars.
The much-anticipated G20 summit between Trump and Chinese President Xi Jinping has come and gone without a calamity, but differences between both sides remain.
The uncertainty over more conflict hangs over markets and is “the largest downside risk” to stocks according to JPMorgan.
The strategists expect …read more
Source:: Business Insider