Smart Alpha portfolios powered by J.P. Morgan Asset Management – investment strategy update

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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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Managed with a strategy set by J.P. Morgan Asset Management’s multi asset team, these portfolios include active ETFs that make use of J.P. Morgan Asset Management’s global research expertise to incorporate research-driven security selection.

As we approach four months from launch, we asked J.P. Morgan Asset Management’s investment specialist Anjali Grover, to provide an update on their current investment thinking and outlook for the months ahead.

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

We believe government and central bank support has carried economies through the worst of the Covid crisis and that will continue to support consumers and businesses as restrictions start to ease and economic activity recovers.

Covid infection rates and casualties are generally on the downtrend globally and the vaccines are providing hope of an end to the pandemic as swift rollouts are likely to allow economies to gradually re-open.

Despite a slower than expected start this year, looking ahead we expect economic activity to rebound meaningfully in the remainder of this year. However, the risk of higher inflation materialising has increased in the face of an economic rebound where consumers are able to return to prior spending habits.

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

Against the backdrop of positive macro-economic conditions, we maintain our constructive outlook and favour a pro-risk stance in our portfolios: preferring equities over bonds.

In equity exposure, we are leaning into regions with higher cyclical exposure and that are more geared to the strong economic recovery that we expect looking ahead this year. We are constructive on the UK market where valuations are attractive, the value-oriented sector mix is favourable in the recovery and some of the Brexit-related uncertainty of last year is behind us. Alongside this, we have also recently reduced non-GBP currency exposure in the portfolios.

From a fixed income perspective, we remain constructive on corporate bonds as company balance sheets continue to improve and the positive growth outlook is supportive for the asset class. We have a less favourable view of government bonds, where higher growth expectations and the risk of potentially higher inflation could lead to further upward pressure on interest rates.

The team’s latest views drive tactical adjustments to the allocation. Smart Alpha portfolios are always managed in line with their stated risk targets.

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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.

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