Investment Strategy

T-minus 75 till 2025: What every investor should know

This week, the S&P 500 hit its 46th all-time high of the year as almost 10% of the index’s market cap released third-quarter earnings reports.

The results so far have been solid, with a deluge of major bank reports coming in above expectations. More than three-quarters of the companies that have reported so far have delivered positive surprises, with those companies, in aggregate, beating expectations by 6.8%.

Throughout the week, the narrative surrounding AI’s major players diverged. ASML, the Dutch semiconductor supply chain stalwart, put pressure on the chip industry stocks on Tuesday after it missed on earnings and revised down 2025 sales guidance. The report raised concerns about sustained demand. On the brighter side, Taiwan Semiconductor Manufacturing crushed analyst expectations, posting quarterly profits up over 50% from the prior year. They also raised full-year sales guidance citing “robust” AI-related demand.

With investors increasingly focused on tangible results and carrying high expectations, third-quarter earnings season will continue to be a test for the big AI names.

Treasury yields fluctuated throughout the week but found clarity after two major macro releases: retail sales and jobless claims. Retail sales for September were strong across the board, beating consensus estimates on the month and well surpassing August’s numbers. Weekly jobless claims came in below estimates and continue to support signs that the labor market remains on steadier footing.

As a result, expectations for a less aggressive Fed easing cycle increased, and the 2-year Treasury moved net -1bps through Thursday to 3.97% while the 10-year was about flat at 4.09%.

There are 75 days until 2025, 20 days until the next Federal Reserve meeting, and 18 days until the U.S. presidential election. (Halloween is 14 days away, but who’s counting?) As we approach the rest of the year’s market catalysts, we are eager to share three key considerations for portfolios alongside timely insights from our Chief Investment Officer (CIO) Richard Madigan’s most recent webcast. In the video, Richard discusses today’s portfolio positioning, key rotations year-to-date, the outlook heading into year-end, considerations around the geopolitical landscape, and the importance of having a disciplined investment process. 

Three principles every investor should know ahead of year-end

1. Practice good portfolio hygiene. Identifying your goals and creating a long-term plan are the first steps in practicing what you might call “good portfolio hygiene.” Like annual visits to the doctor, adding regular “check-ups” to the list is just as important. Why? Market and economic dynamics can shift in both the short and long term. This may lead to unexpected changes to your portfolio.

This week, the bull market celebrated its second “birthday.” Since hitting a low of 3,577 on October 12, 2022, the S&P 500 has posted a total return of more than 60% (so much for the “terrible twos” phase). For investors, those welcome but outsized gains might have thrown long-term asset allocations off balance if left unchecked.

For example, take a basic 60/40 portfolio over the last year (60% invested in S&P 500 stocks and 40% in U.S. Bloomberg Aggregate Index bonds), which has notched an almost 27% total return. Without rebalancing, the same portfolio would now be overweight stocks at 64% and underweight in bonds at 36%, given the performance differential between the two asset classes.

Take some time to review your target asset mix and consider rebalancing. If necessary, trim oversized positions or add to underweighted ones to stay on track. By maintaining a balanced approach and adjusting your allocation as needed, investors can mitigate risks and take advantage of strategic opportunities.

For clients invested in CIO portfolios, this rebalancing has been taken care of for you. As Richard highlights in the webcast, CIO portfolios moved into overweight positions in stock and bond markets in the first quarter of this year, increased stock exposure during the sell-off in early August, and recently rebalanced back to neutral on market strength over the last two months. This shift was primarily valuation-driven, with potential geopolitical tail risks in mind as well.

In addition to the stock bond mix, there have also been rotations within asset classes – right-sizing AI exposures, adjusting European allocations, and leaning into health care – specifically into more opportunistic exposures like weight loss drugs. With a soft landing as the base case, the team is focused on diversifying risk while maintaining a pro-cyclical stance at the portfolio level, with significantly less downside risk than broad equity markets.

Over the last year, a 60/40 portfolio has returned about 27%

S&P 500 and Bloomberg U.S. Aggregate Bond Index total returns

This chart shows the indexed return of a 60/40 portfolio over the past year.
Source: FactSet. Data as of October 16, 2024. Past performance is no guarantee of future results. It is not possible to invest directly in an index.

2. Understand the risks, but prepare for opportunity. In a market often driven by short-term news cycles, there is always something to worry about. We believe it’s crucial to maintain a long-term perspective and keep fundamentals top of mind.

Today, the upcoming U.S. presidential elections and geopolitical turmoil in the Middle East may be causing some investors unease. However, we do not think either should be cause to derail long-term investment plans.

Despite the buzz surrounding each candidate’s policy proposals, Richard reminds us that “campaign promises can be entertaining but are more salacious for the vote than impactful.” In other words, it is essential to focus on the “knowns” rather than the unknowns. We believe the most important implications instead are the resulting policies post-election, and the outcomes of them, with recognition that there is a difference between a short-term trade and a fundamental trend.

Remember, markets tend to notch gains no matter who is in office. Since 1950, there have been 18 presidential elections and 10 transitions in the White House between Democrats and Republicans. Over those 74 years, U.S. GDP growth has averaged a 3.2% annual pace, while the S&P 500 has compounded at 9.4% per year.

If market uncertainty has you second-guessing your portfolio allocation, welcome it as an opportunity to revisit your goals and plan. An advisor can help you make tweaks if necessary so that you can have the confidence to stay invested and reap the benefits of doing so.

Election outcomes do not drive market outcomes over the long-run

U.S. Nominal Gross Domestic Product (GDP), USD trillions, log scale

This chart shows U.S. nominal gross domestic product from 12/31/1930–12/31/2023, showing Democratic and Republican indicators as well as Presidents who have been elected via general election.
Source: BEA, Haver Analytics, White House History, J.P. Morgan. Data as of Q4 2023. Democratic and Republican indicator is the party of the president in the White House at that time. Presidents shown include only those who have been elected via general election.

3. Employ available tools to enhance portfolio efficiency. The integration of technology and innovation into investment strategies might enhance long-term portfolio performance.

For example, take artificial intelligence (AI), which stands to augment the process behind active portfolio management. It may allow managers to gain a competitive edge through better data analysis and quicker decision making. AI can also enhance more traditional strategies like tax-loss harvesting, which involves realizing losses in portfolios to offset gains. This may in turn reduce tax burdens in your portfolio.

At J.P. Morgan, we recognize AI as an important tool for today and beyond. We are dedicated to thoughtfully integrating technology to support our portfolio managers, ensuring it enhances portfolios responsibly and effectively.

Today’s market environment is complex.

These are just a few principles to guide investors through the next 75 days of 2024 and beyond. The insights shared by Richard remind us that while the market landscape may be ever-changing, a disciplined approach rooted in sound principles will always be essential. Start with the basics – establish a mix of stocks and bonds that feel best for you and build from there.

As always, your J.P. Morgan team is here to help.

Descriptive audio

A Conversation with our CIO: Market and Portfolio Insights

All market and economic data as of October 2024 and sourced from Bloomberg Finance L.P. 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.

RISK CONSIDERATIONS

  • Past performance is not indicative of future results. You may not invest directly in an index.
  • The prices and rates of return are indicative, as they may vary over time based on market conditions.
  • Additional risk considerations exist for all strategies.
  • The information provided herein is not intended as a recommendation of or an offer or solicitation to purchase or sell any investment product or service.
  • Opinions expressed herein may differ from the opinions expressed by other areas of J.P. Morgan. This material should not be regarded as investment research or a J.P. Morgan investment research report.
Does your portfolio need a tune-up? Here are a few sound principles to keep in mind.

EXPERIENCE THE FULL POSSIBILITY OF YOUR WEALTH

We can help you navigate a complex financial landscape. Reach out today to learn how.

Contact us
Important Information

All companies referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by J.P. Morgan in this context.

There may be a potential tax implication with a rebalancing strategy. Please consult your tax advisor before implementing such a strategy.​

This material is for informational purposes only, and may inform you of certain products and services offered by private banking businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. Please read all Important Information.

General Risks & Considerations

Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g., equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.

Non-Reliance

Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

© $$YEAR JPMorgan Chase & Co. All rights reserved.

LEARN MORE About Our Firm and Investment Professionals Through FINRA Brokercheck

 

To learn more about J.P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products

 

JPMorgan Chase Bank, N.A. and its affiliates (collectively "JPMCB") offer investment products, which may include bank-managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC ("JPMS"), a member of FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

 

Please read the Legal Disclaimer for key important J.P. Morgan Private Bank information in conjunction with these pages.

INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED

Bank deposit products, such as checking, savings and bank lending and related services are offered by JPMorgan Chase Bank, N.A. Member FDIC.

Not a commitment to lend. All extensions of credit are subject to credit approval.

Equal Housing Lender Icon