Smart Alpha portfolios – investment outlook from the J.P. Morgan Multi-Asset team

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Since their November launch, our Smart Alpha portfolios powered by J.P. Morgan Asset Management have been managing client money by combining passive and active ETFs within a globally diversified asset allocation.

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What is the current investment outlook from the J.P. Morgan Multi-Asset team?

We remain optimistic that a global economic recovery will persist throughout this year and into 2022. This view is supported by the global rollout of a coronavirus vaccine, improving corporate earnings, and a continuation of accommodative policy by governments and central banks.

One of the big questions on investors’ minds is inflation.  We expect inflation to remain elevated in the near term, and bond yields to increase, but we are carefully monitoring inflation expectations and wages for signs of persistent pressure.

We expect monetary policy to remain fairly accommodative around the globe, but think developed market central banks may consider tapering their support towards the end of the year amid concerns around persistent increases in inflation. Fiscal policy is likely to remain supportive too, but we don’t expect much additional stimulus to be announced, as rising consumption starts to drive economic growth.

Overall, our central case remains a strong recovery that stabilises into broad-based growth across the global economy.

 

In light of your outlook, how are portfolios currently positioned?

We remain modestly pro-risk in portfolios with a preference for shares over bonds.

Within equities, we think cyclical sectors and markets stand to benefit the most from a rebound in global growth.  This leads us to favour markets such as the UK, where valuations are attractive and the value-oriented sector mix is favourable in the recovery. Europe also remains one of our preferred regions, with economic growth looking poised to break out as a fuller reopening of the economy takes hold. We are more cautious about US equities, specifically US large caps, as we believe this part of the market has become expensive and changes to corporate tax rates could have a negative impact.

Within fixed income, we are thinking carefully about our exposure to interest rate risk, given inflation concerns. We continue to like corporate bonds as company balance sheets are improving and the positive growth outlook is supportive for the asset class.

 

RIsk Warning

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Forecasts are not a reliable indicator of future performance.

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