What Are the Central Observations of the Jpm Strategists?

What are the central observations of the JPM strategists?

JPM's overall economic outlook is negative. This is influenced by the hard-landing in China and as well as other EM countries in addition to ongoing Euro crisis. In light of the ever-increasing importance of China, the recent cut in growth forecast to 7.5% to 8.5% on top of declining leading indicators such as PMI, JPM has cut global growth forecast projections to 2.1% in 2012 and 2.4% in 2013.

How do they see their implication for global asset allocation?

Given the overwhelming role that macroeconomic drivers play in today's markets, JPM is focusing on relative geographical play on global equities. As such, JPM is long on the US equities relative to its European counterparts. Overall their top pick is Asian equities because they believe that China will not risk sliding into recession and therefore make further stimulus announcements.

JPM's fixed income outlook is overall very negative. This has been influenced by the indecision of European policymakers. Their main concern is that of weakening EM currencies for Asian fixed income instruments and the escalating political stalemate in the Euro zone.

JPM shows strong credit spread play between EM sovereign and EM corporate as the spread is likely to continue widening. However, JPM believes the EM sovereign a good hedge against escalating financial turmoil and also notes the fact that it is more liquid than the corporate.

JPM's foreign exchange play is certainly long on dollar as they recognize the ongoing flight to safety and dollar as the safe haven compared to other currencies.

As for commodities JPM remains skeptical in overall due to China's declining PMI and the slipover effect of EU's crisis to the Chinese economy. They are however neutral in commodities. Note that precious metals are likely to continue their down-slide.