quarterly perspectives...solar panel & washing machine tariffs u.s. steel & aluminum...
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12
1.9%
-10.5%
11.8%
2.5% 2.0% 1.0% 1.1% 1.4% 1.4%
-15%
-10%
-5%
0%
5%
10%
15%
0.6%
-1.3%
-9.0%
7.4%
0.6% 0.5% 0.5% 0.4% 0.4%
-10%
-5%
0%
5%
10%
0.1%
-3.7%
-11.8%
11.8%
0.9% 1.1% 0.9% 0.6% 0.5%
-20%
-10%
0%
10%
20%
Real GDP growthQuarter-over-quarter change
Source: J.P. Morgan Economic Research, J.P. Morgan Asset Management. Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
China Eurozone
U.S.
Forecast
ForecastReal GDP levelsIndexed to 1Q 2006 = 100
Japan
40
100
160
220
280
340
400
90
100
110
120
130
140
150
'06 '08 '10 '12 '14 '16 '18 '20
-1.8%-0.6%
-7.9%
2.6% 3.1%
0.7% 0.7% 0.2% 0.2%
-10%
-5%
0%
5%
4Q '19 1Q '20 2Q '20 3Q '20 4Q '20 1Q '21 2Q '21 3Q '21 4Q '21
China
Eurozone
U.S.
Japan
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•
•
•
18
-5
-4
-3
-2
-1
0
1
2
3
4
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '210
2
4
6
8
10
12
14
16
18
20
22
24
26
-2
0
2
4
6
8
10
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
Source: Bank of England, Bank of Japan, Bloomberg, European Central Bank, J.P. Morgan Securities Research, UK debt management office, U.S. Federal Reserve, J.P. Morgan Asset Management. (Right) FactSet. *G4 is the eurozone, Japan, UK and the U.S. 2020 and 2021 estimates are from J.P. Morgan Asset Management’s Global Fixed Income, Currency and Commodities team. **Forecasts are based on implied monetary policy settings. Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
G4 bank purchases and government issuance*USD trillions
G4 central bank balance sheetsUSD trillions
Net issuance – U.S.
Net purchase – G4 ex-U.S.
Net issuance – G4 ex-U.S.
Net purchase – U.S.
Net supply after QE
12-month change
in balance sheetCentral bank
balance sheet
Forecast**
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24
Source: 2020 Democratic Party Platform, Donald Trump campaign website, J.P. Morgan Asset Management.Based on current conditions subject to change from time to time. Provided solely to illustrate general trend. Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
Presidential candidates’ campaign platformComparison of anticipated changes
Issues Trump Biden
Taxes • Tax cuts to boost take-home pay
• Tax credits for “Made in America”
• Reverse 2017 tax cuts & raise taxes on corporate income,
high income individuals and capital gains
• Expand tax credits to support domestic manufacturing
• More tax credits to low-middle-income families
China • Reduce reliance on China
• Promote companies to relocate back to the U.S. from
China
• Reinforce intellectual property rights protection, trade
practices
• Cooperation on issues of mutual interest (climate change)
• Not resorting to unilateral trade tariff
Infrastructure • High-speed internet network
• Clean drinking water and clean air
• High-speed internet network
• Clean drinking water
• Clean energy
• Upgrade ports and freights
Energy • Promote energy independence • Reduce emissions
• Green energy
Regulations • Deregulation for energy independence • Strengthen regulations on financial services, technology and
energy
Foreign Policy • “America First” • “Revitalizing American Diplomacy”
Health care • Cut prescription drug prices
• Reduce insurance premium
• Universal health care (Affordable Care Act)
• Cut prescription drug prices
• Reduce insurance premium
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42
S&P 500 earnings and performanceNext 12 months’ earnings per share estimates Index level
Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management.Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
S&P 500 performance contributionPrice return since 23 March low
Next 12 months’
EPS estimatesIndex levelS&P 500 forward EPS S&P 500 index level
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55%
Info Tech
Cons. Disc
Health Care
Telecoms
Industrials
Financials
Cons.Staples
Materials
Real Estate
Utilities
Energy
Total
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50
Source: Barclays, Bloomberg Finance L.P., FactSet, ICE BofA Merrill Lynch, J.P. Morgan Economics Research, MSCI, J.P. Morgan Asset Management. Based on Bloomberg Barclays U.S. Treasury (UST) Bellwether 2y & 10y (2y & 10y UST), Bloomberg Barclays Treasury Inflation-Protected Securities (TIPS), ICE BofAML Country Government (1-10y) (France, Germany, Japan & UK (1-10y)), Bloomberg Barclays U.S. Aggregate, Credit – Investment Grade & High Yield (U.S. Aggregate, IG & HY), Bloomberg Barclays U.S. Floating Rate (U.S. Floating Rate), Bloomberg Barclays U.S. Aggregate Securitized – Mortgage-Backed Securities (U.S. MBS), Bloomberg Barclays Pan-European High Yield (Europe HY), J.P. Morgan GBI-EM Global (Local EMD), J.P. Morgan EMBI Global (USD EMD), J.P. Morgan Asia Credit (JACI) (USD Asia Credit), J.P. Morgan Asia Credit (JACI) – High Yield (USD Asia HY), J.P. Morgan Asia Credit China Index (USD China offshore credit), J.P. Morgan CEMBI (USD EMD corporates), J.P. Morgan Asia Diversified (JADE) (Local Asia). *Correlations are based on 10-years of monthly returns. Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
Yields and correlations of fixed income returns to equities Yield, 10-year correlation between monthly total returns
Government
Credit
Emerging Market
Higher yielding
sectors
Stronger correlation
to equities
Government & Credit
2y UST
10y UST TIPS
Japan (1-10y)
Germany (1-10y)
France (1-10y)
UK (1-10y)
U.S. Aggregate
U.S. IG
U.S. HY
U.S. Floating RateU.S. MBS
Europe HY
Local EMDUSD EMD
USD Asia Credit
USD Asia HY
USD EMD corporates
Local Asia USD China offshore credit
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
-0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Yie
ld t
o m
atu
rity
(12
-mo
nth
av
era
ge)
Correlation to MSCI AC World*
•
•
•
•
60
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
60
70
80
90
100
110
120
130
140
'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: FactSet, OECD, Tullet Prebon, WM/Reuters, J.P. Morgan Asset Management. *The U.S. dollar index shown here is a nominal trade-weighted index of major trading partners’ currencies. Major currencies are the British pound, Canadian dollar, euro, Japanese yen, Swedish kroner and Swiss franc. **DM is developed markets and the yield is calculated as a GDP-weighted average of the 10-year government bond yields of Australia, Canada, France, Germany, Italy, Japan, Switzerland and the UK.Past performance is not a reliable indicator of current and future results.Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
U.S. dollar and interest rate differentialIndex Yield spread
Recessions
U.S. minus DM 10-year
government bond yield**U.S. dollar index* •
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4
EM Asia ex-China* manufacturing PMI and real GDP growthIndex Year-over-year change
EM Asia ex-China* investment and exportsYear-over-year change, 3-month moving average
Source: IHS Markit, J.P. Morgan Economic Research, National Statistics Agencies, J.P. Morgan Asset Management; (Right) Netherlands Bureau of Policy Analysis. PMI = Purchasing Managers’ Index. Manufacturing PMIs are relative to 50, which indicates contraction (below 50) or expansion (above 50) of the manufacturing sector. *Emerging Market (EM) Asia ex-China includes Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
Nominal investment
Export volumes
Manufacturing PMI GDP growth
-30%
-20%
-10%
0%
10%
20%
30%
'01 '03 '05 '07 '09 '11 '13 '15 '17 '19-12%
-8%
-4%
0%
4%
8%
12%
35
40
45
50
55
60
65
'04 '06 '08 '10 '12 '14 '16 '18 '20
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•
•
•
33
1%
-2% -1%
-2%
-19%
-9%
-6%
-33%
26%
32%
24%
40%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
U.S. EM Asia Pacific ex-Japan
Europe
Earnings growthEarnings per share, year-over-year change, consensus estimates
Source: IBES, MSCI, Standard & Poor’s, Thomson Reuters Datastream, J.P. Morgan Asset Management. Asia Pacific ex-Japan, emerging markets (EM), Europe and U.S. equity indices used are the MSCI Asia Pacific ex-Japan, MSCI Emerging Markets, MSCI Europe and S&P 500, respectively. Consensus estimates used are calendar year estimates from IBES. Revisions are based on the current unreported year. Net earnings revisions is (number of companies with upward earnings revisions – number of companies with downward earnings revisions) / number of total companies. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
Earnings revisions ratiosNet earnings revisions to consensus estimates, 13-week moving average
U.S.
Europe
Asia Pacific
ex-Japan
Japan
-80%
-60%
-40%
-20%
0%
20%
40%
60%
'14 '15 '16 '17 '18 '19 '20
20212019 2020
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38
Source: MSCI, J.P. Morgan Asset Management. (Top) IBES. Equity indices used are the respective MSCI indices. Consensus estimates used are calendar year estimates from IBES. (Bottom) FactSet. Sector indices used are from the MSCI AC Asia Pacific ex-Japan Index. Consensus estimates used are calendar year estimates from FactSet. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
Earnings growth by sectorEarnings per share, year-over-year change, consensus estimates
Earnings growth by marketEarnings per share, year-over-year change, consensus estimates 2020 2021
2020 2021
14.7%
10.0%
-13.7% -10.6%
11.1%
-3.3%
32.2%
10.4%
-27.4%-20.4%
-50.4%
10.5%12.8% 14.2% 16.8% 17.0% 17.9% 24.3% 24.7%
39.1%
62.9% 63.9%
-60%
-40%
-20%
0%
20%
40%
60%
80%
Utilities Consumerstaples
Financials Real estate Communicationservices
Materials Informationtechnology
Health care Industrials Consumerdiscretionary
Energy
11.4%
0.3%
-6.2%
-37.0% -33.8%-26.6% -27.0%
-34.4%
17.3%
-10.2%
14.2%19.5%
24.2%31.8% 32.1% 32.3% 34.8% 38.3% 42.0% 42.7%
-50%
-25%
0%
25%
50%
Taiwan China Asia Pacific ex-Japan
Thailand Singapore Indonesia Hong Kong Philippines Korea India
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7
25
30
35
40
45
50
55
60
65
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Contribution to real GDP growthYear-over-year change
Caixin/Markit Purchasing Managers’ IndicesLevel
Source: J.P. Morgan Asset Management; (Left) CEIC, National Bureau of Statistics of China; (Right) Caixin/Markit, J.P. Morgan Economic Research.*Purchasing Managers’ Index (PMI) is relative to 50, which indicates deceleration (below 50) or acceleration (above 50) of economic activities in the sector.Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
Net exports
Gross capital formation (investment)
Consumption
GDP
Manufacturing
Services
08/2020: 54.0
1H2020: -1.6%
09/2020: 53.0
-8%
-4%
0%
4%
8%
12%
16%
20%
'80 '85 '90 '95 '00 '05 '10 '15 '20
•
•
•
•
•
10
0.0%
1.5%
3.0%
4.5%
6.0%
7.5%
'15 '16 '17 '18 '19 '20
Key interest ratesPer annum
Source: CEIC, People’s Bank of China, J.P. Morgan Asset Management; (Left) Ministry of Finance of China; (Right) National Interbank Funding Center.*Credit impulse measures the year-over-year change of credit flow (net aggregate social financing) as a percentage of nominal GDP. Rolling 12-month nominal GDPand credit stock are used in the calculation. **In August 2019, the PBoC started to release 1-year and 5-year loan prime rates (LPR) on a monthly basis, which arebased on quotes from 18 large banks. LPR has become the benchmark for commercial loans and floating rate loan contracts.Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
Interbank repo (7-day)
Medium-term lending
facility (1-year)
Deposit rate (1-year)
Loan prime
rate (1-year)**
Chinese credit impulse and global new orders% of nominal GDP, year-over-year change Difference from one year ago
Credit impulse* (advanced 6 months)
Global composite PMI - New orders
Lending rate (1-year)
-30
-25
-20
-15
-10
-5
0
5
10
15
20
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
•
•
•
•
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57
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
CentralGov.
Policy &Development
Banks
LocalGov.
Banks Other***Industrials OtherFinancials
RealEstate
Source: J.P. Morgan Asset Management; (Top left) FTSE Russell, J.P. Morgan Economics Research, National Interbank Funding Center; (Right and bottom left) Bloomberg Finance L.P. *Credit indices shown are yield-to-worst, government bond index shown displays yield-to-maturity. FTSE Dim Sum Bond Index (CNH China offshore credit), J.P. Morgan Asia Credit China Index (USD China offshore credit). **Bond market outstanding refers to the total U.S. dollar value of bonds (corporate and government) in the market and does not reflect mandatory prepayment. ***Other includes: Communications, Consumer Discretionary, Consumer Staples, Energy, Health Care, Materials, Technology, Utilities. ****Risk-adjusted return is annualized returns from 31/12/2004 to 30/09/2020, correlation data uses returns over the same period.Guide to the Markets – Asia. Data reflect most recently available as of 30/09/20.
Onshore bond market outstanding** by issuer sectorUSD billions
Bond yields*% per annum
3-year China
Government Bond Index
USD China
offshore creditCNH China offshore credit
Eligible for
benchmark
inclusion
Risk-adjusted return and correlation****
Benchmark Index
Developed Market
Emerging Market
0%
2%
4%
6%
8%
10%
12%
'11 '13 '15 '17 '19
India
Indonesia
Malaysia
Thailand
Mexico
South Africa
China onshore
Australia
France
GermanyItaly
Japan
UK
Global AggS&P 500
China A-Share
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
0.0 0.2 0.4 0.6 0.8 1.0
Ris
k-a
dju
ste
d r
etu
rn
Correlation to Global Agg
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