Here are the five things I’m most thankful for this Thanksgiving.

Our Top Market Takeaways for the week ending November 29, 2019.

Giving thanks

Happy Thanksgiving

With the holiday season upon us, I want to wish all of our readers a happy Thanksgiving. Here are the five things I’m most thankful for (aside from the obvious: my family, friends and health).

1.     I’m thankful that low inflation is saving our butts. Throughout the cycle, we—and others—have lamented that inflation has been stubbornly low. We sort of root for a little inflation because it’s a sign of a healthy and vibrant economy. But lately we’re feeling rather appreciative for its absence. You see, coming into 2019, expectations were for the Fed, which had already hit the brakes nine times, to hike three or even four more times. With the trade war brewing, sentiment souring and global manufacturing tumbling, markets were rightfully concerned that more hikes could tip the economy into a recession. But then everything changed. The Fed’s posture swung to dovish, and instead of hiking four times in 2019, it ended up cutting three times. This has given rise to receding recession fears and a surging stock market (not to mention two freshly refinanced mortgages by yours truly). The absence of inflation made the Fed pivot possible, and will likely serve to extend the cycle—and for that, I’m thankful.

2.     I’m thankful that we didn’t “go to cash.” As I mentioned above, we were cautious going into 2019. In fact, our caution had been building for a while by then, but that’s OK because we had an array of dimmers and dials at our disposal to accordingly calibrate risk in our investment portfolios. For example, we reduced our overweight to stocks, basically eliminated exposure to high yield credit, and focused on dividend growth stocks in the United States—all of which we believed would help our portfolios hold up better in a downturn. But there is one measure to reduce risk that we did not take: adding to cash. Instead, we added to core bonds because, especially in a falling interest rate environment, bonds can do more than act as a buffer…they can actually make money! The chart below shows the return so far this year for cash versus. other bonds. And so I’m thankful that our fixed income strategists and our fund managers opted to extend exposure to core bonds (we call it “add duration”), instead of using cash, to de-risk. 

Bar chart shows year-to-date total return for the following: U.S. 20+ Year Treasuries, U.S. Corp. IG, U.S. Corp. HY, U.S. 7–10 Year Treasuries, U.S. Agg. Bonds, Global Agg. Bonds, Municipal Bonds and USD Cash. The chart highlights that out of all these asset classes, cash has performed the worst.

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3.     I’m thankful for a future that is rife with opportunity. With the S&P 500 at or near all-time highs, it’s easy to see why some investors are less excited about the upside going forward. Our firm’s own Long-Term Capital Market Assumptions are projecting average annual returns of only 5.4% for a 60/40 portfolio over the next 10 years—the lowest I can remember. So what can investors do to find growth in a low-growth world? This is where my excitement for certain secular trends comes in. At J.P. Morgan, we believe technologies like artificial intelligence and machine learning will revolutionize how companies make decisions and how consumers interact with the world around them. We believe gene therapy has the potential to offer “cures” for a range of cardiovascular, neurological, musculoskeletal and other rare diseases, and even various forms of cancer. We believe spending on cybersecurity will grow rapidly, and that interest in environmental plays like electric vehicles or alternative energy sources will all represent opportunities for investors. I’m thankful that J.P. Morgan has a robust Investment Solutions platform with offerings aligned to each of these many exciting themes.

4.     Time to brag a little: I’m thankful for the goals-based approach that our advisors use to help our clients achieve their objectives. Why are you investing in the first place? Is it to get your money to grow for eternity, over multiple generations? Is it to pay for your child’s future education costs? Is it simply to protect it from losing value? Maybe your goal is to spend every last penny during your lifetime—enjoy! Time and time again, I’ve been impressed at how the advisors I work with at J.P. Morgan tailor the investment recommendations they make to align with what a client is trying to achieve. We want to help clients reach their investments destinations without taking unnecessary risk. We don’t ask a client’s risk tolerance—rather, we work to understand how much risk is required to achieve their goal, and how much risk the client can afford to take. I’m thankful for my own J.P. Morgan advisor, who made sure I liquidated some stocks and kept the proceeds in a less volatile asset class to ensure I could reach my goal of buying a lake house last year. 

I’m grateful for JPMorgan Chase’s commitment to driving inclusive growth and creating an economy that works for more people.

5.     I’m thankful for what J.P. Morgan does for our communities. I love this company. I’ve been here more than 17 years. I’m grateful for JPMorgan Chase’s commitment to driving inclusive growth and creating an economy that works for more people. As Jamie Dimon, our CEO, mentioned in his annual letter to shareholders, “we extended credit and raised capital of $2.5 trillion for business, institutional clients and U.S. customers” last year, and we actively strive to lift up our communities. Look at a city like Detroit, where our firm has invested $150 million over the past five years to help catalyze development, boost small businesses, revitalize neighborhoods and equip Detroiters with skills required for in-demand jobs. I’m honored to be part of a company that has hired more than 14,000 veterans since 2011. I’m proud that we’ve “banned the box” asking about criminal backgrounds on our job applications, and are committed to giving people with criminal backgrounds across the United States a second chance to reenter the workforce and community. And I’m excited to see how we’ll continue to break down barriers to opportunities in the future: JPMorgan Chase has pledged to invest $1.75 billion by 2023 to drive inclusive growth in communities around the world.

 

All market and economic data as of November 2019 and sourced from Bloomberg and FactSet unless otherwise stated.

We believe the information contained in this material to be reliable but do not warrant its accuracy or completeness. Opinions, estimates, and investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice.

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