Guide to the Markets MARKET INSIGHTS - Europe | - JP Morgan Asset Management
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
MARKET INSIGHTS Guide to the Markets Europe | 2Q 2020 | As of 31 March 2020
Global Market Insights Strategy Team
Dr. David Kelly, CFA
New York
Karen Ward
Samantha Azzarello London
New York
Tilmann Galler, CFA
Chaoping Zhu, CFA
Frankfurt Tai Hui
David Lebovitz Shanghai
Hong Kong
New York
Michael Bell, CFA
Dr. Cecelia Mundt
London
New York
Maria Paola Toschi
Milan Yoshinori Shigemi
Marcella Chow
Gabriela Santos Tokyo
Hong Kong
New York
Hugh Gimber, CFA
London
Alex Dryden, CFA
New York
Vincent Juvyns Agnes Lin
Ian Hui
Luxembourg Taipei
John Manley Hong Kong
Shogo Maekawa
New York Ambrose Crofton, CFA Tokyo
London
Meera Pandit, CFA
Manuel Arroyo Ozores, CFA
New York
Madrid
Jordan Jackson
New York Jai Malhi, CFA Dr. Jasslyn Yeo, CFA
London Singapore
Kerry Craig, CFA
Melbourne
Tyler Voigt, CFA Lucia Gutierrez Mellado
New York Madrid
Jennie Li
Max McKechnie
2 New York
London
Page reference
Global economy Equities Other assets
4. Global growth 47. Global earnings expectations and equity valuations 78. Commodities
5. Global Purchasing Managers’ Index (PMI) for manufacturing 48. Global income 79. Gold
6. Global unemployment 49. Global equity sector weights 80. Stock-bond correlation and downside protection
7. Global inflation 50. Equity issuance and buybacks 81. Alternative investments
8. Global core inflation and inflation expectations 51. US earnings 82. Sustainable investment strategies
9. Global central bank policy 52. US equity valuations 83. Sustainable investment policy interventions and market size
10. Global currencies 53. US valuations and subsequent returns 84. Asset return expectations
11. Global trade 54. Equities and interest rates 85. The cost of hedging
12. Productivity and population growth 55. US bull and bear markets
13. US GDP 56. Europe earnings
14. US Economic Monitor 57. Europe equity valuations Investing principles
15. US business surveys 58. Europe equity market and currency
16. US business investment 59. Europe large, mid and small capitalisation equities 86. Life expectancy
17. US consumer 60. UK earnings 87. The effect of compounding
18. US labour market 61. UK equity market and currency 88. Cash investments
19. US non-farm payrolls and initial jobless claims 62. Japan earnings 89. Long-term asset returns
20. US Conference Board indicators 63. Japan equity market and currency 90. Annual returns and intra-year declines
21. US household and corporate finances 64. Emerging market equity drivers 91. Asset class risk-return trade-off
22. US inflation 65. Emerging market equity valuations and subsequent returns 92. S&P 500 and fund flows
23. US Federal Reserve policy rate 66. Equity focus: Characteristics of S&P 500 downturns 93. US asset returns by holding period
24. US politics 67. World stock market returns 94. Asset class returns (EUR)
25. US focus: Labour market and energy sector investment
26. Eurozone GDP
27. Eurozone business investment Fixed income
28. Eurozone consumer
29. Eurozone labour market 68. Fixed income yields and interest rate risk
30. Eurozone unemployment 69. Global government bond yields
31. Eurozone inflation 70. US yield curve
32. European Central Bank policy rate 71. US investment-grade bonds
33. Eurozone debt 72. US high yield bonds
34. Eurozone government debt and bond spreads 73. Europe and UK investment-grade bonds
35. Eurozone focus: Sectors impacted by social distancing 74. Europe high yield bonds
36. UK GDP 75. Emerging market bonds
37. UK consumer 76. Fixed income focus: Central bank asset purchases
38. UK inflation 77. Global fixed income spreads and returns
39. UK focus: Business investment
40. Japan GDP
41. China GDP
42. China debt
43. China inflation and policy rates
44. Emerging market currencies and current account
45. Emerging market structural dynamics
46. Emerging market focus: Oil supply and net dependency
3
Global growth GTM – Europe | 4
Real GDP growth Contribution to global real GDP growth
% change year on year % change year on year
6 5
4 4
Global economy
2 3
0 2
-2 1
-4 0
2020 forecast Global
-6 US -5,3% -1 EM ex-China
-3,7% DM ex-US
UK
US
-8 Eurozone -3,4% -2
China
Japan -3,1%
-10 -3
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 '18
Source: (Left) BEA, Eurostat, Japan Cabinet Office, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. Forecasts are from J.P. Morgan Securities Research.
(Right) Refinitiv Datastream, World Bank, J.P. Morgan Asset Management. EM is emerging markets. DM is developed markets.
Past performance and forecasts are not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
4
Global Purchasing Managers’ Index (PMI) for manufacturing GTM – Europe | 5
'20
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 '20
Feb Mar
Global 47,1 47,6
Developed 49,5 46,0
Emerging 44,6 49,1
Global economy
Eurozone 49,2 44,5
France 49,8 43,2
Eurozone
Germany 48,0 45,4
Italy 48,7 40,3
Spain 50,4 45,7
Greece 56,2 42,5
Ireland 51,2 45,1
Sweden 53,2 43,2
Developed
Switzerland 49,5 43,7
UK 51,7 47,8
US 50,7 48,5
Japan 47,8 44,8
China 40,3 50,1
Indonesia 51,9 45,3
Korea 48,7 44,2
Emerging
Taiwan 49,9 50,4
India 54,5 51,8
Brazil 52,3 48,4
Mexico 50,0 47,9
Russia 48,2 47,5
Source: Markit, J.P. Morgan Asset Management. The Global Purchasing Managers’ Index (PMI) for manufacturing assesses the economic health of the sector by
surveying manufacturing businesses regarding output, new orders, stocks of purchases, supplier delivery times and employment. A score of 50 indicates that
economic activity is neither expanding nor contracting, above 50 indicates expansion. The colours range from red to yellow to green, where red is below 50, yellow is
at 50 and green is above 50. Quarterly averages are shown, except the two most recent monthly data points. Past performance is not a reliable indicator of current
and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
5
Global unemployment GTM – Europe | 6
Unemployment rates
%
14
Eurozone
UK
12 US
Global economy
Japan
10
8
6
4
2
0
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: BLS, Eurostat, Japan Ministry of Internal Affairs & Communications, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a
reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
6
Global inflation GTM – Europe | 7
2018 2019 2020
May
May
Aug
Aug
Nov
Nov
Sep
Sep
Dec
Dec
Feb
Mar
Jun
Mar
Jun
Feb
Jan
Apr
Jan
Apr
Oct
Oct
Jul
Jul
Global 2,2 2,2 2,4 2,6 2,7 2,7 2,7 2,8 2,4 2,1 1,9 1,9 2,2 2,4 2,3 2,1 2,1 2,0 1,9 2,0 2,4 2,7 2,9 2,5
Developed 1,9 1,8 2,2 2,3 2,4 2,3 2,1 2,3 1,9 1,6 1,4 1,4 1,6 1,8 1,5 1,5 1,4 1,3 1,3 1,2 1,5 1,7 1,8 1,5
Global economy
Emerging 2,7 2,7 2,8 3,0 3,1 3,2 3,6 3,5 3,1 2,9 2,7 2,6 3,1 3,3 3,4 3,2 3,2 3,1 3,0 3,3 3,8 4,2 4,7 4,0
Eurozone 1,4 1,2 2,0 2,0 2,2 2,1 2,1 2,3 1,9 1,5 1,4 1,5 1,4 1,7 1,2 1,3 1,0 1,0 0,8 0,7 1,0 1,3 1,4 1,2
France 1,7 1,8 2,3 2,3 2,6 2,6 2,5 2,5 2,2 1,9 1,4 1,6 1,3 1,5 1,1 1,4 1,3 1,3 1,1 0,9 1,2 1,6 1,7 1,6
Eurozone
Germany 1,5 1,3 2,1 1,9 1,9 1,9 1,9 2,3 2,1 1,6 1,4 1,5 1,3 2,0 1,4 1,6 1,7 1,4 1,2 1,1 1,1 1,5 1,7 1,7
Italy 0,9 0,6 1,0 1,4 1,9 1,6 1,5 1,7 1,6 1,2 0,9 1,1 1,1 1,1 0,9 0,8 0,3 0,5 0,2 0,2 0,2 0,5 0,4 0,2
Spain 1,3 1,1 2,1 2,3 2,3 2,2 2,3 2,3 1,7 1,2 1,0 1,1 1,3 1,6 0,9 0,6 0,6 0,4 0,2 0,2 0,5 0,8 1,1 0,9
Greece 0,2 0,5 0,8 1,0 0,8 0,9 1,1 1,8 1,1 0,6 0,5 0,8 1,0 1,1 0,6 0,2 0,4 0,1 0,2 -0,3 0,5 1,1 1,1 0,4
Ireland 0,5 -0,1 0,7 0,7 1,0 0,9 1,2 1,1 0,8 0,8 0,8 0,7 1,1 1,7 1,0 1,1 0,5 0,6 0,6 0,6 0,8 1,1 1,1 0,9
Sweden 2,0 1,8 2,0 2,1 2,2 2,1 2,5 2,4 2,1 2,2 2,0 1,9 1,8 2,1 2,1 1,6 1,5 1,3 1,3 1,6 1,8 1,7 1,5 1,3
Developed
Switzerland 0,7 0,4 1,0 0,9 1,2 1,3 1,1 1,1 1,0 0,8 0,7 0,7 0,7 1,1 0,5 0,7 0,4 0,5 0,1 -0,3 -0,3 -0,1 0,2 -0,2
UK 2,5 2,4 2,4 2,4 2,5 2,7 2,4 2,4 2,3 2,1 1,8 1,9 1,9 2,1 2,0 2,0 2,1 1,7 1,7 1,5 1,5 1,3 1,8 1,7
US 2,4 2,5 2,8 2,9 2,9 2,7 2,3 2,5 2,2 1,9 1,6 1,5 1,9 2,0 1,8 1,6 1,8 1,7 1,7 1,8 2,1 2,3 2,5 2,3
Japan 1,1 0,6 0,7 0,7 0,9 1,3 1,2 1,4 0,8 0,3 0,2 0,2 0,5 0,9 0,7 0,7 0,5 0,3 0,2 0,2 0,5 0,8 0,7 0,4
China 2,1 1,8 1,8 1,9 2,1 2,3 2,5 2,5 2,2 1,9 1,7 1,5 2,3 2,5 2,7 2,7 2,8 2,8 3,0 3,8 4,5 4,5 5,4 5,2
Indonesia 3,4 3,4 3,3 3,2 3,4 3,4 3,0 3,3 3,4 3,2 2,8 2,7 2,5 2,8 3,1 2,8 2,8 3,1 3,1 2,9 2,7 2,6 2,7 3,0
Emerging
Korea 1,2 1,5 1,5 1,5 1,1 1,4 2,1 2,0 2,0 1,3 0,8 0,5 0,4 0,6 0,7 0,7 0,6 0,0 -0,4 0,0 0,2 0,7 1,5 1,1
Taiwan 1,6 2,0 1,8 1,4 1,8 1,5 1,7 1,2 0,3 -0,1 0,2 0,2 0,6 0,7 0,9 0,9 0,4 0,4 0,4 0,4 0,6 1,1 1,9 -0,2
India 4,3 4,6 4,9 4,9 4,2 3,7 3,7 3,4 2,3 2,1 2,0 2,6 2,9 3,0 3,0 3,2 3,1 3,3 4,0 4,6 5,5 7,4 7,6 6,6
Brazil 2,7 2,8 2,9 4,4 4,5 4,2 4,5 4,6 4,0 3,7 3,8 3,9 4,6 4,9 4,7 3,4 3,2 3,4 2,9 2,5 3,3 4,3 4,2 4,0
Mexico 5,0 4,6 4,5 4,7 4,8 4,9 5,0 4,9 4,7 4,8 4,4 3,9 4,0 4,4 4,3 4,0 3,8 3,2 3,0 3,0 3,0 2,8 3,2 3,7
Russia 2,3 2,4 2,4 2,3 2,5 3,1 3,4 3,5 3,8 4,3 5,0 5,2 5,3 5,2 5,1 4,7 4,6 4,3 4,0 3,8 3,5 3,0 2,4 2,3
Source: Bank of Mexico, DGBAS, ECB, Goskomstat of Russia, IBGE, India Ministry of Statistics & Programme Implementation, Japan Ministry of Internal Affairs &
Communication, Korean National Statistical Office, National Bureau of Statistics China, ONS, Refinitiv Datastream, Riksbank, Statistics Indonesia, Swiss National
Bank, US Federal Reserve, J.P. Morgan Asset Management. Figures shown are for headline inflation and are % change year on year. Heatmap colours are based on
the respective central bank target inflation rates. Blue is below target, white is at target and red is above target. Past performance is not a reliable indicator of current
and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
7
Global core inflation and inflation expectations GTM – Europe | 8
Core inflation Market-based inflation expectations
% change year on year %, 5y5y inflation swap
5 5
4
Global economy
4
UK
Headline inflation
target
3 3
US
2 2
1 1
Eurozone
Japan
0 0
US
-1 UK -1
Eurozone
Japan
-2 -2
'07 '09 '11 '13 '15 '17 '19 '07 '09 '11 '13 '15 '17 '19
Source: (Left) Bank of Japan, BLS, Eurostat, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core inflation for the US
is defined as CPI excluding food and energy. Core inflation for Japan is defined as CPI excluding fresh food and energy. Core inflation for the UK and the eurozone is
defined as CPI less energy, food, alcohol and tobacco. Japan core CPI has been adjusted down by 2% from April 2014 to March 2015 to remove the estimated impact
of the consumption tax hike over this period. (Right) Bloomberg, J.P. Morgan Asset Management. 5y5y inflation swap represents the market’s expectation of five-year
average inflation, starting in five years’ time. Data for Japan starts in March 2007 due to data availability. Past performance is not a reliable indicator of current and
future results. Guide to the Markets - Europe. Data as of 31 March 2020.
8
Global central bank policy GTM – Europe | 9
Market expectations for policy rate Central bank balance sheets
% USD trillions
12-month change in Global central bank
1,00 7,0 24
balance sheet balance sheet
Forecast* 22
6,0
0,75
Global economy
20
5,0
0,50 18
US
4,0 16
0,25 UK
14
3,0
0,00 12
Japan 2,0
10
-0,25
Eurozone 1,0 8
-0,50 6
0,0
Switzerland 4
-0,75 -1,0
2
-1,00 -2,0 0
Mar ’20 Mar ’21 Mar ’22 Mar ’23 Mar ’24 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: (Left) Bloomberg, J.P. Morgan Asset Management. Expectations are calculated using OIS forwards. (Right) Bank of England (BoE), Bank of Japan (BoJ),
European Central Bank (ECB), Refinitiv Datastream, Swiss National Bank (SNB), US Federal Reserve (Fed), J.P. Morgan Asset Management. Global central bank
balance sheet is the sum of the balance sheets of the BoE, BoJ, ECB, Fed and SNB. *Balance sheet forecast assumptions: BoE to have net asset purchases totalling
GBP 200 billion until August, after which net purchases continue at GBP 10 bn per month ; BoJ to have an annualised net asset purchase pace of JPY 50 tn over the
forecast period; ECB to have net asset purchases totalling EUR 1.1 tn; SNB balance sheet to increase by CHF 165 bn over the remainder of 2020, with the balance
sheet increasing at a slowing pace over the course of the year; Fed has set no limit to its asset purchases but we have assumed net asset purchases of USD 3.0 tn
9 over the remainder of 2020. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
Global currencies GTM – Europe | 10
Real effective exchange rates
Index level rebased to 100 in 2010, broad real effective exchange rate (REER)
160
USD
150 GBP
Global economy
EUR
140
JPY
130
120
110
100
90
80
70
60
'75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19
Source: J.P. Morgan Securities Research, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future
results. Guide to the Markets - Europe. Data as of 31 March 2020.
10Global trade GTM – Europe | 11
Exports of goods Global export volumes
% of nominal GDP, 2018 % change year on year, three-month moving average
8
US
US DM
China
Global
Eurozone EM ex-China
EM
Global economy
6
Canada Eurozone
Other
UK
4
Brazil
India 2
China
Russia 0
Mexico
-2
Japan
Korea
-4
0 5 10 15 20 25 30 35 40 45 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: (Left) IMF Direction of Trade, IMF World Economic Outlook, J.P. Morgan Asset Management. (Right) CPB Netherlands, Refinitiv Datastream,
J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
11Productivity and population growth GTM – Europe | 12
Drivers of US GDP growth Global working-age population growth
Annualised % change Annualised % change
5,0 1,2
Growth in workers
+ Growth in real output per worker
4,5 4,5% Growth in real GDP 1,0
Global economy
0,8
4,0
0,6
3,5
3,2% 3,2%
0,4
3,0% 3,0%
3,0 1,6%
0,2
2,5
0,0
2,0 1,1%
-0,2
1,4% 1,7%
1,5
1,9% -0,4
2,2% 0,7%
1,0 -0,6
-0,8 1980-2000 2000-2020 2020-2040
0,5
2,8% 1,0% 1,3% 1,6% 1,9% 1,0% -1,0
0,0
'58 - '67 '68 - '77 '78 - '87 '88 - '97 '98 - '07 '08 - '19 US UK Eurozone Japan
Source: (Left) BEA, BLS, J.P. Morgan Asset Management. GDP drivers are calculated as the average annualised growth between 4Q from the preceding year in the
period and 4Q of the last year of the period. (Right) United Nations (UN) Department of Economic and Social Affairs, J.P. Morgan Asset Management. Working-age
population is defined as aged 15-69. Data from 2020 onwards are UN forecasts. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 31 March 2020.
12US GDP GTM – Europe | 13
Contribution to US real GDP growth and ISM composite
% change year on year (LHS); index level (RHS)
6 65
4 60
Global economy
2 55
0 50
-2 45
Net exports
Change in inventories
-4 40
Investment
Average
Government 4Q19
since 2000
-6 Consumption 35
2,1% 2,3%
ISM composite (RHS)
-8 30
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: BEA, Bloomberg, ISM, Refinitiv Datastream, J.P. Morgan Asset Management. The Institute for Supply Management (ISM) composite is an economy-weighted
average of the manufacturing and non-manufacturing surveys. A score of 50 indicates that economic activity is neither expanding nor contracting, above 50 indicates
expansion. ISM data is shown with quarterly frequency. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe.
Data as of 31 March 2020.
13US Economic Monitor GTM – Europe | 14
US economic indicators Key:
Percentile rank relative to historic data since 1990 Elevated
Broad indicators Consumer and services Manufacturing Labour market recession risk
100
Global economy
Lower
90 recession risk
80
70
60
50
Latest
40
30
20
10
Higher
recession risk
0
Conference Conference Consumer ISM non- ISM Non-farm
Board Leading Board Leading confidence: manufacturing manufacturing: payrolls
Economic Index Credit Index Present New orders
situation
Source: BLS, Conference Board, ISM, Refinitiv Datastream, J.P. Morgan Asset Management. Elevated recession risk flags are shown when the underlying indicator is
at a level consistent with the onset of any of the past three US recessions, as determined by NBER. Transformations used for each of the indicators are: % change
year on year for the Leading Economic Index and consumer confidence present situation, index level for Leading Credit Index, ISM non-manufacturing and ISM
manufacturing new orders and three-month moving average of monthly absolute change for non-farm payrolls. Past performance is not a reliable indicator of current
and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
14US business surveys GTM – Europe | 15
US ISM manufacturing: New orders US ISM non-manufacturing
Index level Index level
Recession
75 65
70
Global economy
60
65
60
55
55
Elevated
50 50 recession risk
Elevated
45 recession risk
45
40
35
40
30
25 35
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) ISM, Refinitiv Datastream, J.P. Morgan Asset Management. Periods of “recession” are defined using US National Bureau of Economic Research
(NBER) business cycle dates. Elevated recession risk line is shown as the highest value of the underlying indicator observed at the start of the past three US
recessions, as determined by NBER. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe.
Data as of 31 March 2020.
15US business investment GTM – Europe | 16
US future capex intentions and business investment
% change year on year (LHS); index level (RHS)
20 40
Business investment Future capex intentions
Duke CFO future capex intentions
15
Global economy
30
10
20
5
0 10
-5
0
-10
-10
-15
-20 -20
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: BEA, Dallas Fed, Duke CFO Global Business Outlook, Haver Analytics, Kansas City Fed, New York Fed, Philadelphia Fed, Refinitiv Datastream, Richmond
Fed, J.P. Morgan Asset Management. Future capex intentions is an average index level of the five aforementioned Fed districts equally weighted, displayed using a
three-month moving average. Duke CFO future capex intentions is expected growth in the next 12 months. Past performance is not a reliable indicator of current and
future results. Guide to the Markets - Europe. Data as of 31 March 2020.
16US consumer GTM – Europe | 17
US consumer confidence: Present situation US house prices relative to income
% change year on year Index level
Recession
125 140
100
Global economy
130
75
50 120
25
110
0
Elevated
-25 recession risk 100
-50
90
-75
-100 80
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '79 '84 '89 '94 '99 '04 '09 '14 '19
Source: (Left) Conference Board, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) OECD, Refinitiv Datastream, J.P. Morgan Asset Management.
Periods of “recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. Elevated recession risk line is shown as the highest
value of the underlying indicator observed at the start of the past three US recessions, as determined by NBER. Past performance is not a reliable indicator of current
and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
17US labour market GTM – Europe | 18
US unemployment rate and wage growth
%, wage growth is year on year
12
Global economy
10
8 Unemployment
6
Feb 2020:
3,5%
4
2 Wage growth Feb 2020:
3,3%
0
'67 '72 '77 '82 '87 '92 '97 '02 '07 '12 '17
Source: BLS, Refinitiv Datastream, J.P. Morgan Asset Management. Wage growth is average hourly earnings of total private production and non-supervisory
employees. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
18US non-farm payrolls and initial jobless claims GTM – Europe | 19
US non-farm payrolls US initial jobless claims
Monthly change in thousands, three-month moving average Thousands, 12-week moving average
400 Recession 700
300 650
Global economy
600
200
550
100
Elevated
recession risk 500
0
450
-100
400
-200
350
-300
300
-400 250
-500 200
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) BLS, Refinitiv Datastream, J.P. Morgan Asset Management. Periods of “recession” are defined using US National Bureau of Economic Research
(NBER) business cycle dates. Elevated recession risk line is shown as the highest value of the underlying indicator observed at the start of the past three US
recessions, as determined by NBER. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe.
Data as of 31 March 2020.
19US Conference Board indicators GTM – Europe | 20
US Leading Economic Index US Leading Credit Index
% change year on year Index level
Recession
15 8
Lending
conditions
Global economy
10 6 tightening
5 4
0 2 Elevated
recession risk
Elevated
recession risk
-5 0
-10 -2
-15 -4
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) Conference Board, Refinitiv Datastream, J.P. Morgan Asset Management. Periods of “recession” are defined using US National Bureau of
Economic Research (NBER) business cycle dates. Elevated recession risk line is shown as the highest value for the Leading Economic Index and lowest for the
Leading Credit Index at the start of the past three US recessions, as determined by NBER. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 31 March 2020.
20US household and corporate finances GTM – Europe | 21
US household debt and net saving US non-financial corporate debt and net saving
% of nominal GDP % of nominal GDP
Household Recession Household Non-financial Non-financial
110 net saving 9 80 corporate debt corporate net 6
debt
saving
8
Global economy
100 75 4
7
90 6 70 2
5
80 65 0
4
70 3 60 -2
2
60 55 -4
1
50 0 50 -6
'90 '94 '98 '02 '06 '10 '14 '18 '90 '94 '98 '02 '06 '10 '14 '18
Source: (All charts) BEA, Refinitiv Datastream, US Federal Reserve, J.P. Morgan Asset Management. Household net saving is defined as net disposable income
minus final consumption expenditure. Non-financial corporate net saving is defined as the difference between gross savings (less net capital transfers paid and
excluding foreign earnings retained abroad) and capital expenditures. Non-financial corporate net saving data has been smoothed in 2018 to account for the Tax Cuts
and Jobs Act of 2017. Periods of “recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. Past performance is not a
reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
21US inflation GTM – Europe | 22
US headline and core inflation Average February US core goods and services inflation Average February
% change year on year since 2000 2020 % change year on year since 2000 2020
Headline CPI 2,2% 2,3% 6 Services CPI 2,8% 3,0%
6
Core CPI 2,0% 2,4% Core goods CPI 0,0% 0,0%
5
Global economy
5
4
4 Headline inflation
target 3
3
2
2
1
1
0
0 -1
-1 -2
-2 -3
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) BLS, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and
energy. Core goods CPI is defined as goods CPI excluding food and energy. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 31 March 2020.
22US Federal Reserve policy rate GTM – Europe | 23
Federal funds policy rate expectations
% Fed funds rate, FOMC and market expectations Federal Reserve policy actions
Restarted asset purchase programme
7
• Purchases of Treasuries and agency MBS are now unlimited
• Expanded the programme to include agency CMBS
Global economy
6 Launched a Primary (PMCCF) and Secondary Corporate Credit Facility (SMCCF)
Reduced reserve requirements for the banking sector
5 Restarted Term Asset-backed securities Loan Facility (TALF)
4
Federal funds rate
US FOMC December 2019 forecasts (median)
3
Market expectations on 31 March 2020 (mean)
2
1
0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
Source: Bloomberg, US Federal Reserve, J.P. Morgan Asset Management. Market expectations are calculated using OIS forwards. MBS: Mortgage-backed securities,
CMBS: Commercial mortgage-backed securities. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe.
Data as of 31 March 2020.
23US politics GTM – Europe | 24
Votes or seats in the Electoral College, Senate and the House of Representatives
Number of votes / elected
representatives needed for majority
Electoral College Last election result 270
Global economy
538
227 vs. 304*
Senate 51**
100
47 vs. 53
House of Representatives 218
435
238 vs. 197
Democratic Party Republican Party
Source: 270 to Win, The Cook Political Report, J.P. Morgan Asset Management. *In 2016 Trump earned 306 pledged electors, Clinton 232. They lost, respectively,
two and five votes to faithless electors in the official tally. **51 seats are needed for a simple majority if the dominant party in the Senate is not represented in the
White House. If the president and majority party are the same, only 50 seats are needed for a majority because the vice president casts the tie-breaking vote. 2016
numbers include two independents that vote with the Democrats. Guide to the Markets - Europe. Data as of 31 March 2020.
24US focus: Labour market and energy sector investment GTM – Europe | 25
US job openings, hires and layoffs US investment growth and contribution of energy sector
Millions, monthly % change year on year, contribution to private business investment
Recession
8 15
Job openings
7 10
Global economy
6 5
5 Job hires 0
4 -5
Business investment growth
3 -10 Ex-energy investment
Energy investment
Job layoffs
2 -15
1 -20
'01 '03 '05 '07 '09 '11 '13 '15 '17 '19 '03 '06 '09 '12 '15 '18
Source: (Left) BLS, Refinitiv Datastream, J.P. Morgan Asset Management. Periods of “recession” are defined using US National Bureau of Economic Research
(NBER) business cycle dates. (Right) BEA, Refinitiv Datastream, J.P. Morgan Asset Management. Energy investment includes investment in mining, shafts and wells.
Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
25Eurozone GDP GTM – Europe | 26
Contribution to eurozone real GDP growth and composite PMI
% change year on year (LHS); index level (RHS)
6 65
Global economy
4 60
2 55
0 50
-2 45
Net exports
Change in inventories
-4 40
Investment
Government Average
4Q19
-6 Consumption since 2000 35
Composite PMI (RHS) 1,4% 1,0%
-8 30
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: Eurostat, Markit, Refinitiv Datastream, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50 indicates that economic
activity is neither expanding nor contracting, above 50 indicates expansion. PMI data is shown with quarterly frequency. Past performance is not a reliable indicator of
current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
26Eurozone business investment GTM – Europe | 27
Eurozone business investment and investment confidence
% change year on year (LHS); index level (RHS)
10 20
10
Global economy
5
0
0
-10
-20
-5
-30
Business investment Investment goods industry
-10
confidence
-40
-15 -50
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: Eurostat, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 31 March 2020.
27Eurozone consumer GTM – Europe | 28
Eurozone consumer confidence Eurozone house prices relative to income
Index level Index level
Recession
0 250
Spain
Global economy
France
-5 200 Italy
Germany
-10 150
-15 100
-20 50
-25 0
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 '20
Source: (Left) European Commission, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) OECD, Refinitiv Datastream, J.P. Morgan Asset Management.
Light grey columns indicate recession in the eurozone. Pre-2000, recessions are determined by a recession occurring in either Germany or at an EU-15 level.
Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
28Eurozone labour market GTM – Europe | 29
Eurozone unemployment rate and wage growth
%, wage growth is year on year
13 5,0
Unemployment Wage growth
12 4,5
Global economy
11 4,0
10 3,5
9 3,0
Feb 2020:
8 7,3% 2,5
7 2,0
6 4Q19: 1,5
1,7%
5 1,0
4 0,5
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: ECB, Refinitiv Datastream, J.P. Morgan Asset Management. Wage growth is compensation per employee. Past performance is not a reliable indicator of
current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
29Eurozone unemployment GTM – Europe | 30
Germany, France, Italy and Spain unemployment rates
%
28
24
Global economy
20
16 Spain
12
Italy
8
France
4
Germany
0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: Eurostat, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 31 March 2020.
30Eurozone inflation GTM – Europe | 31
Eurozone headline and core inflation Eurozone core goods and services inflation
% change year on year Average March 2020 % change year on year Average March 2020
5 since 2000 (flash) 3,5 since 2000 (flash)
Headline CPI 1,7% 0,7% Services CPI 1,9% 1,3%
Core CPI 1,4% 1,0% 3,0 Core goods CPI 0,6% 0,5%
Global economy
4
2,5
Headline inflation
target
3
2,0
2 1,5
1,0
1
0,5
0
0,0
-1 -0,5
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) Eurostat, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI less energy, food,
alcohol and tobacco. Core goods CPI is defined as goods CPI less energy, food, alcohol and tobacco. Past performance is not a reliable indicator of current and future
results. Guide to the Markets - Europe. Data as of 31 March 2020.
31European Central Bank policy rate GTM – Europe | 32
European Central Bank policy rate expectations
% deposit rate, market expectations European Central Bank policy actions
4,0 Launched the Pandemic Emergency Purchase Programme (PEPP)
• Minimum of €750bn to be purchased by the end of 2020
• Increased flexibility on issuer and maturity limits
3,5
• Short-term deviations from the capital key permitted
Global economy
• Greek bonds are eligible for purchase
3,0
Expanded existing Asset Purchase Programme (APP) by €120bn
2,5 Expanded eligibility of non-financial commercial paper for the Corporate Sector
Purchase Programme (CSPP)
2,0 Enhanced Targeted Longer-Term Refinancing Operations (TLTROs)
1,5
1,0
ECB deposit rate
0,5 Market expectations on 31 March 2020 (mean)
0,0
-0,5
-1,0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
Source: Bloomberg, European Central Bank, J.P. Morgan Asset Management. Market expectations are calculated using OIS forwards. Past performance is not a
reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
32Eurozone debt GTM – Europe | 33
Eurozone debt to GDP ratios Eurozone debt service ratios
% of nominal GDP % of disposable income
120 7,5 40
Households Non-financial corporates
Non-financial corporates
110 39
Global economy
7,0
100 38
Government
90 37
6,5
80 36
6,0
70 35
60 34
5,5
Households
50 33
40 5,0 32
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) Bank for International Settlements, Refinitiv Datastream, J.P. Morgan Asset Management. Debt refers to gross debt. Debt service ratios are a
GDP-weighted average of France, Germany, Italy and Spain. For the household sector, gross disposable income is the amount of money that all of the individuals in
the household sector have available for spending or saving after income distribution measures (for example, taxes, social contributions and benefits) have taken
effect. For the non-financial corporate sector, gross disposable income is essentially akin to gross operating surplus before dividends or interest are paid. Past
performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
33Eurozone government debt and bond spreads GTM – Europe | 34
France, Germany, Italy and Spain government debt to GDP European 10-year government bond spreads over Germany
% of nominal GDP % spread
160 7
140 6
Global economy
Italy
120
5 Spain
France
100
4
80
3
60
Italy 2
40
France
Spain
1
20 Germany
0 0
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: (Left) Bank for International Settlements, Refinitiv Datastream, J.P. Morgan Asset Management. Italy and France data are four-quarter moving averages. Debt
refers to gross debt. (Right) Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 31 March 2020.
34Eurozone focus: Sectors impacted by social distancing GTM – Europe | 35
Breakdown of eurozone inflation basket by type of consumption
% weight
15,6
18,9 Transport
Global economy
Sectors most Restaurants and hotels
impacted by
social distancing Recreation and culture
Clothing and footwear
10,1
9,6 Utilities
Food and non-alcoholic
Sectors less
beverages
impacted by
8,8 social distancing Misc. goods and services
Other
15,1
5,9
16,1
Source: Eurostat, J.P. Morgan Asset Management. Weights are from the eurozone Harmonised Index of Consumer Prices index. Other category includes household
furnishings, health, alcoholic beverages and tobacco, communication and education. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 31 March 2020.
35UK GDP GTM – Europe | 36
Contribution to UK real GDP growth and composite PMI
% change year on year (LHS); index level (RHS)
6 65
Global economy
4 60
2 55
0 50
-2 45
Net exports
-4 Change in inventories 40
Investment
Government Average
4Q19
-6 since 2000 35
Consumption
1,9% 1,1%
Composite PMI (RHS)
-8 30
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: Markit, ONS, Refinitiv Datastream, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50 indicates that economic activity
is neither expanding nor contracting, above 50 indicates expansion. PMI data is shown with quarterly frequency. Past performance is not a reliable indicator of current
and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
36UK consumer GTM – Europe | 37
UK consumer confidence UK house prices relative to income
Index level, three-month moving average Index level
20 130
Recession
120
Global economy
10
110
0 100
90
-10
80
-20 70
60
-30
50
-40 40
'87 '92 '97 '02 '07 '12 '17 '87 '92 '97 '02 '07 '12 '17
Source: (Left) GfK, Refinitiv Datastream, J.P. Morgan Asset Management. (Right) OECD, Refinitiv Datastream, J.P. Morgan Asset Management. Light grey columns
indicate recession. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
37UK inflation GTM – Europe | 38
UK headline and core inflation UK core goods and services inflation
% change year on year Average February % change year on year Average February
since 2000 2020 since 2000 2020
6 6
Headline CPI 2,0% 1,7% Services CPI 3,3% 2,5%
Core CPI 1,7% 1,7% Core goods CPI -0,7% 0,3%
Global economy
5
4
4
Headline inflation 2
target
3
0
2
-2
1
-4
0
-1 -6
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) ONS, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI less energy, food,
alcohol and tobacco. Core goods CPI is defined as goods CPI less energy, food, alcohol and tobacco. Past performance is not a reliable indicator of current and future
results. Guide to the Markets - Europe. Data as of 31 March 2020.
38UK focus: Business investment GTM – Europe | 39
UK and G7 ex-UK real business investment
Index level, rebased to 100 in 1Q 2007
140 Brexit referendum
G7 ex-UK
Global economy
130
120
110
UK
100
90
80
70
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: Bank of England, OECD, ONS, Oxford Economics, Refinitiv Datastream, Statistics Canada, US Bureau of Economics Analysis, J.P. Morgan Asset
Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
39Japan GDP GTM – Europe | 40
Contribution to Japan real GDP growth and manufacturing PMI
% change year on year (LHS); index level (RHS)
6 62
4 58
Global economy
2 54
0 50
-2 46
Net exports
-4 42
Change in inventories
Investment
-6 38
Government
Average
4Q19
Consumption since 2000
-8 34
Manufacturing PMI (RHS) 0,9% -0,7%
-10 30
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: Japan Cabinet Office, Markit, Refinitiv Datastream, J.P. Morgan Asset Management. PMI is Purchasing Managers’ Index where a score of 50 indicates that
economic activity is neither expanding nor contracting, above 50 indicates expansion. PMI data is shown with quarterly frequency. Past performance is not a reliable
indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
40China GDP GTM – Europe | 41
Contribution to China real GDP growth 2020 China industrial production and retail sales
2019
forecast
% change year on year % change year on year
20 6,1% 1,1% 25
GDP growth
Investment
Global economy
Consumption
15 Net exports 20
10 15
Retail sales
5 10
0 5
Industrial production
-5 0
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (Left) National Bureau of Statistics of China, Refinitiv Datastream, J.P. Morgan Asset Management. Forecast is from J.P. Morgan Securities Reseach. (Right)
National Bureau of Statistics of China, Refinitiv Datastream, J.P. Morgan Asset Management. Industrial production is a three-month moving average and retail sales is
a six-month moving average. Past performance and forecasts are not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 31 March 2020.
41China debt GTM – Europe | 42
China debt to GDP ratios China credit growth
% of nominal GDP % change year on year
180 40
Non-financial corporates
160
35
Global economy
140
30
120
25
100 Broad credit
20
80
15
60
Government RMB bank lending
10
40
Households
20 5
0 0
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: (Left) Bank for International Settlements, Refinitiv Datastream, J.P. Morgan Asset Management. Debt refers to gross debt. (Right) People’s Bank of China
(PBoC), J.P. Morgan Asset Management. This chart includes two measures of credit ranging from the narrowest – bank lending – to the more extensive broad credit.
Specifically, bank lending is the sum of all loans made by the commercial banking system to domestic borrowers. Broad credit includes all finance provided to non-
financial entities in private and public sectors. Broad credit is all funding to domestic borrowers, including bank lending, trust loans, entrusted loans, bankers’
acceptances, corporate bonds, equity financing by non-financial enterprises, asset-backed securities, loan write-offs, central government and local government bonds.
Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
42China inflation and policy rates GTM – Europe | 43
China inflation China interbank rate and reserve requirement ratio (RRR)
Average February
% change year on year since 2007 2020 % rate
15 Headline CPI 2,8% 5,2% 7 30
Core CPI 1,3% 1,0% SHIBOR RRR
Headline PPI 1,0% -0,4%
Global economy
6
10 25
5
5 20
4
3
0 15
2
-5 10
1
-10 0 5
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: (Left) Bloomberg, Refinitiv Datastream, J.P. Morgan Asset Management. CPI is the Consumer Price Index. Core CPI is defined as CPI excluding food and
energy. PPI is the Producer Price Index. (Right) People’s Bank of China, Refinitiv Datastream, J.P. Morgan Asset Management. Average RRR for large and small
banks. SHIBOR is the three-month interbank rate. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe.
Data as of 31 March 2020.
43Emerging market currencies and current account GTM – Europe | 44
EM currencies vs. US dollar EM current account balance
% from fair value, relative to US dollar % of nominal GDP
30 1,6
EM currencies
expensive 1,2
20 relative to USD
Global economy
0,8
+1 std. dev.
10 0,4
0,0
0
Average
-0,4
-10
-0,8
-1 std. dev. EM current
-1,2 account balance
-20 improving
-1,6
-30
-2,0
-40 -2,4
'92 '96 '00 '04 '08 '12 '16 '20 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19
Source: (Left) J.P. Morgan Asset Management. Fair value is based on nominal exchange rates relative to PPP exchange rates and is adjusted for GDP per capita.
(Right) Bloomberg, J.P. Morgan Asset Management. EM currencies and current account balances are created using the current weighted average of JPM GBI-EM
Global Diversified Index countries. Current account balance is the balance of a country’s net trade in goods and services, its net earnings on cross-border investments
and its net transfer payments. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
44Emerging market structural dynamics GTM – Europe | 45
Urbanisation, real GDP per capita and population size Share of global real GDP
Urbanisation rates, %, and GDP per capita, USD, bubble size is population %
60.000 30
AUS
USA
NLD
CAN
Global economy
50.000 Developed markets 25
JPN US
DEU
Emerging markets
FRA GBR
40.000
20 Eurozone
HKG
GDP per capita
ITA
ESP
30.000
KOR 15
China
20.000 SAU
TUR
10
CHN RUS BRA ARG
10.000 THA MEX
Japan
IDN ZAF 5
IND
0
0
0 20 40 60 80 100 India
0
-10.000 Urbanisation rate '70 '75 '80 '85 '90 '95 '00 '05 '10 '15
Source: (Left) World Bank, J.P. Morgan Asset Management. Urbanisation rate refers to the proportion of the total population living within an urban area defined by
national statistical offices. Countries are labelled using three-letter International Organisation of Standardisation country codes. (Right) Refinitiv Datastream, World
Bank, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe.
Data as of 31 March 2020.
45Emerging market focus: Oil supply and net dependency GTM – Europe | 46
Crude oil production by country Net oil production by country
Million barrels per day % of nominal GDP, 2018
22,5
Thailand -4,7
S. Korea -3,8 Net oil consumers
20,0
Global economy
India -3,7
17,5 OPEC (ex-Saudi Arabia & Iran) S. Africa -3,4
Turkey -3,1
15,0 Indonesia -2,3
US Japan -1,8
12,5
Russia China -1,7
10,0
EU ex-UK -1,4
US -0,6
7,5 Saudi Brazil -0,5
Arabia
UK -0,4
5,0 Net oil producers
Mexico 0,5
Russia 11,7
2,5
Iran Saudi Arabia 25,8
0,0 -8 -4 0 4 8 12 26
16
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (Left) Bloomberg, EIA, J.P. Morgan Asset Management. (Right) British Petroleum, IMF, J.P. Morgan Asset Management. Past performance is not a reliable
indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
46Global earnings expectations and equity valuations GTM – Europe | 47
Consensus estimates for global earnings per share growth Global forward price-to-earnings ratios
% change year on year, earnings per share estimates x, multiple
18 75x
40x
2020 2021
Current
35x
14 Range since 1990
Average since 1990
30x
10
25x
Equities
6 20x
15x
2
10x
-2
5x
-6 0x
US Europe UK Japan EM US Europe UK Japan EM
ex-UK ex-UK
Source: (Left) FTSE, IBES, MSCI, Refinitiv Datastream, Standard & Poor’s, TOPIX, J.P. Morgan Asset Management. MSCI indices are used for Europe ex-UK and
EM. UK is FTSE All-Share, US is S&P 500 and Japan is TOPIX. Data used are in local currency, except for EM, which is in US dollars. (Right) IBES, MSCI, Refinitiv
Datastream, Standard & Poor’s, J.P. Morgan Asset Management. MSCI indices are used for all regions/countries (due to data availability), except for the US, which is
represented by the S&P 500. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
47Global income GTM – Europe | 48
Asset yield comparison
% yield Equity
9,9
10 Fixed income 8,8
8 Average Europe inflation: 1,5% Alternatives 6,9
6,5
(12 months to February 2020) 5,7
6 5,1
4,5
4 3,0 3,2
1,9
2
0,0
0
-2 -0,5
German Cash Euro IG DM equity EM equity MSCI Global Global REITs EM debt Global DM high yield Global
Equities
Bunds Europe infrastructure convertibles transport
Equity index yields
% yield Buyback yield
7
Dividend yield
6
5
4
3
2
1
0
FTSE All-Share MSCI Europe ex-UK S&P 500 MSCI World MSCI Japan MSCI EM
Source: (Top) Bloomberg Barclays, BofA/Merrill Lynch, Clarkson, Drewry Maritime Consultants, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Additional yield often comes with
associated capital and/or liquidity risk. Global infrastructure yield is as of September 2019. Yields for the bond indices are yield to worst and dividend yields for the equity indices. Global transport
levered yield is rental income minus operating expenses, debt amortisation and interest expenses, expressed as a percentage of equity value. Global convertibles: Bloomberg Barclays Global
Convertibles; DM equity: MSCI World; EM equity: MSCI EM; German bunds: Germany 10-year yield; Euro IG: Bloomberg Barclays Euro Agg. – Corporates; Global REITs: FTSE NAREIT
Index; DM high yield: BofA/Merrill Lynch Developed Markets High Yield Constrained; EM debt: J.P. Morgan EMBI Global; Global infrastructure: MSCI Global Infrastructure Asset Index – Low
risk. (Bottom) Bloomberg, FTSE, MSCI, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Buyback yield is last 12 months’ buybacks divided by the market cap of the
48 index. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.Global equity sector weights GTM – Europe | 49
Global equity sector weights
% of total market cap
25 US Europe ex-UK UK EM
20
15
10
5
0
Equities
IT Health Care Financials Comm. Serv. Cons. Discr. Industrials Cons. Staples Energy Utilities Materials
MSCI World Growth and Value sector weights
% of total market cap
35
MSCI World Growth MSCI World Value
30
25
20
15
10
5
0
IT Health Care Financials Comm. Serv. Cons. Discr. Industrials Cons. Staples Energy Utilities Materials
Source: (Top) MSCI, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Indices are all MSCI, except for US, which is S&P 500. (Bottom)
MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Real estate is not included in these sector breakdowns due to the small size of the weight in each index.
Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 31 March 2020.
49Equity issuance and buybacks GTM – Europe | 50
Breakdown of US net equity issuance Breakdown of European net equity issuance
USD billions, 12-month rolling USD billions, 12-month rolling
400 400 400 400
200 200 300 300
0 0 200 200
-200 -200 100 100
Equities
-400 -400 0 0
-600 -600 -100 -100
-800 Net issuance -800 -200 -200
Net issuance
Issuance
Issuance
-1.000 Buybacks -1.000 -300 -300
Buybacks
-1.200 -1.200 -400 -400
'04 '06 '08 '10 '12 '14 '16 '18 '20 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: (All charts) Bernstein, Bloomberg, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 31 March 2020.
50US earnings GTM – Europe | 51
S&P 500 earnings and performance US nominal GDP growth and earnings growth
Next 12 months’ earnings per share estimates (LHS); index level (RHS) % change year on year
190 3.500 10 S&P 500 trailing EPS 40
S&P 500 forward EPS
170 8 30
3.000
150
6 20
2.500
130
4 10
Equities
110 2.000
2 0
90 1.500
0 -10
70
1.000
-2 -20
50
500
30 -4 -30
S&P 500 index level US nominal GDP
2020 / 2021 nominal
GDP forecasts
10 0 -6 -40
'86 '90 '94 '98 '02 '06 '10 '14 '18 '86 '90 '94 '98 '02 '06 '10 '14 '18 '22
Source: (Left) IBES, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Earnings data is based on 12-month forward estimates. (Right) BEA,
IBES, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. Earnings data is last 12 months’ earnings per share. Nominal GDP forecasts are from
J.P. Morgan Securities Research. Past performance and forecasts are not a reliable indicator of current and future results. Guide to the Markets - Europe.
Data as of 31 March 2020.
51US equity valuations GTM – Europe | 52
S&P 500 forward P/E ratio S&P 500 forward P/E ratio sector breakdown
x, multiple Difference between current P/E multiple and average P/E since 1990
Average
26 3
Valuation measure since Latest
1990 2
24 Shiller CAPE ratio 25,9x 23,2x
P/B ratio 2,9x 2,8x 1
0
22
-1
20 -2
Equities
-3
18
-4
Cheap relative to
Average: 15,9x -5 history
16
-6
14 31 Mar 2020: -7
Comm. Serv.
Health Care
IT
Cons. Discr.
S&P 500
Utilities
Materials
Financials
Industrials
Cons. Staples
Energy
15,0x
12
10 10,9 12,9 8,3 12,4 16,7 13,1 14,6 16,8 15,0 17,7 16,6
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Current forward P/E ratio
Source: (Left) FactSet, IBES, Refinitiv Datastream, Robert Shiller, Standard & Poor’s, J.P. Morgan Asset Management. P/E ratio calculated using IBES earnings
estimates for next 12 months. P/E data may differ from Guide to the Markets - US, which uses FactSet earnings estimates. Shiller cyclically-adjusted P/E (CAPE) is
price-to-earnings ratio adjusted using trailing 10-year average inflation-adjusted earnings. P/B ratio is trailing price-to-book ratio. (Right) IBES, Refinitiv Datastream,
Standard & Poor’s, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe.
Data as of 31 March 2020.
52You can also read
