JP Morgan Asset Management

European asset managers must pursue economies of scale to stay competitive with their US counterparts, argues Vincent Juvyns, a market strategist at JP Morgan Asset Management. Fragmentation across Europe’s capital markets is also a key issue that hinders competitiveness, he says.

The negative correlation between bonds and stocks is no longer a certainty due to structurally higher inflation expected in the coming decade. It has therefore become an “absolute necessity” to complement the traditional 60/40 portfolio with alternatives, said Vincent Juvyns, global market strategist at JP Morgan Asset Management, during the firm’s presentation of its outlook for the second half of the year.

Europe’s economy is heading for recession. The war in Ukraine, an energy crisis, rising inflation and rising interest rates are increasingly starting to hamper economic growth. With cyclical sectors in particular are expected to be affected, as they are the most sensitive to the state of the economy. However, the impact of an economic slowdown can be different for each sector. In any case, the price performance of the various sectors this year shows no in any case, no unambiguous picture and there is also a large dispersion in returns.

JPMorgan Asset Management plans to convert a number of active mutual funds in the US to passive ETFs next year. The asset manager is not alone. Globally, passive is starting to catch up with active.

While equities will remain a dominant feature of sustainable investment portfolios, multi-asset and alternative strategies are expected to gain ground in the coming years. A new survey conducted among European investors shows that they expect their allocation to equities will decrease by two percent over the next five years, while their allocation to multi-asset and alternative funds will rise by two percent.

Have financial markets reached a bottom yet? Or is there more room on the downside? Investors, keen to find out how close to the bottom markets are, will be looking at Frankfurt on Thursday where the European Central Bank will again shed its lights on efforts to bring inflation under control. Will ECB President Christine Lagarde’s comments hold clues on where markets might move next?