The financial planner JP Morgan Asset Management (AM) has put his predictions on the next interest rate cuts on the table and has announced that he expects the European Central Bank (ECB) to lower the price of money for the month of June . . Currently, the body headed by Christine Lagarde has rates at 4.5%. In addition, JP Morgan AM has delayed the movement by the United States Federal Reserve (Fed), whose rates are at 5.25% and 5.5%, until the end of this year 2024.
Pending the movements of the central banks, they have chosen to remain neutral in debt duration in view of the fact that yields are going to move in a contained range.
The firm’s director of strategy for Spain and Portugal, Lucía Gutiérrez-Mellado, stated in the quarterly presentation of perspectives and strategies presented to the media that “there are going to be interest rate cuts, but they are going to come later than expected.” expected” as a result of “inflation that is once again a topic that comes up in all conversations”, especially after the bad data from the United States released last week – above what the market expected, ranking at 3 .5% in that country.
The executive of the JP Morgan manager has maintained that they are overweighting risk assets in portfolios, focusing on fixed income in credit and, in particular, low credit quality credit (‘high yield’, in the jargon, which offers more return at the cost of assuming more risk) due to the coupon it offers compared to other assets.
Variable income and risks for portfolios.
On the equity side, an area that they overweight compared to liquidity, JP Morgan AM has explained that they are betting on stock market shares due to the expectation of profit growth that will spread across several sectors -and not just technology-, although this situation will be more accentuated in the United States than in Europe – a geography in which they remain neutral – due to the prospect of better economic growth in the former.
Regarding the risks that the portfolios face, Gutiérrez-Mellado has stressed that the main one is that of a more sticky and anchored inflation in the United States that ends up translating into a more aggressive monetary policy, although the scenario they manage is that of an inflation that, although with bumps, will decline throughout the year.
Regarding inflation, the catalysts for more bullish prices would come from geopolitical conflicts; on the one hand, the escalation of the conflict between Iran and Israel after the former’s attack on the Jewish State last weekend and, on the other, the complications that may occur in the Strait of Hormuz, an important maritime commercial passageway.
“Portfolios have to be well diversified and the workforce must not be lost in the event of possible conflicts,” Gutiérrez-Mellado stressed in this regard. Regarding their economic growth forecasts, JP Morgan contemplates a base scenario of economic slowdown but still with positive rates.
“This year we will see a convergence between the United States and the rest of the world after a very strong 2023 in the American country; Europe and Japan should narrow that difference, while China casts more doubts,” the directive, which is But growth of around 2% for the United States in 2024 compared to a Europe that is beginning to stabilize the growth of economic activity.
“This year we will see a convergence between the United States and the rest of the world”
In this sense, he explained that the drivers of growth are the rebound in manufacturing activity and consumption which, thanks to the fall in inflation, is encouraged by the recovery of the purchasing power of families. In addition, he has pointed to public support such as the Recovery Plans in Spain and Europe, the effects of which will begin to be felt this year, as well as the following ones.
On the issue of China, they have indicated that they are not seeing the recovery of the real estate market at the moment since the measures approved so far are still not enough. “It is important that this sector achieves stability to give confidence to the private sector and consumption, which remains quite flat,” said Gutiérrez-Mellado to highlight the doubts that China achieves its objective of growing 5%.
