Presentation on theme: "Investment Communication Skills May 2014 FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION."— Presentation transcript:
Investment Communication Skills May 2014 FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION
Learning objectives To enhance investment communication skills and help clients with a deeper understanding of their investment goals Create client messages to help them understand the importance of a well balanced portfolio Communicate to clients that your investment strategies are designed to take best advantage of appropriate levels of risk.
A collection of easy to use charts on global markets –Designed to help you explain market events and economic data to your clients supporting their investment decision making A comprehensive information source –The guide provides a “go-to” source for market and economic information Timely and relevant –The guide is released at the beginning of each quarter Easy to use: “Simplify the Complex” –Most people are visual learners and the guide charts help to simplify complex concepts
How will this help my clients? I t generates messages that are simple without being simplistic It does not offer opinions by itself – it is an illustrative tool It provides clients with information to help them make more informed investment decisions It enhances advisers understanding of the implications of the wider economic backdrop and the influence this has on their clients portfolios It helps their clients avoid being too driven by short term market events Arms advisers with ideas and insights to be shared with their clients Guide to the Markets helps you to have more engaged in-depth conversations with clients helping to build stronger relationships with them:
Portfolio Discussions Two-page document primarily focused on specific asset classes, Used to articulate and support basic investment cases Leverages slides from the Guide as examples of discussion points with end clients
Portfolio Discussions Topics include Investing in Europe, Investing in the UK Emerging market equities
Quarterly Perspectives Quarterly review of four key topics related to high-level macro economic themes Timely, yet also has enough shelf time to last for the full quarter Leverage slides from the Guide to help illustrate key points around each theme with clients Commentary and bullet points help to simplify the complex
Global recovery – Insight from an alternative perspective PMI is a measure of manufacturing confidence based upon raw material inventories Heat mapping shows a picture of global recovery Developed markets particularly strong Top line – 86% of economies on positive territory Source: Markit, J.P. Morgan Asset Management. Heatmap colours are based on PMI relative to 50, which indicates expansion or contraction of the sector, for the time period shown. Expansion is percentage of 35 country universe covered by Markit with a PMI greater than 50 or a six month increase in the index greater than or equal to four. “Guide to the Markets - UK”. Data as at 31 March 2014.
Macro economics Low and rising inflationary environment An environment that favours equity and commodity returns Fixed Interest – Positive territory still possible in High Yield Choose fixed interest funds with a strategic approach to asset allocation Source: (All charts) BLS, Barclays Capital, Robert Shiller, Federal Reserve, Strategas/Ibbotson, J.P. Morgan Asset Management. Period returns are the arithmetic average of the nominal annual returns for the years specified by category. High or low inflation distinction is relative to median CPI inflation for the periods 1972-2013. *High yield returns based on the period 1984 – 2013. Rising or falling inflation distinction is relative to the previous year CPI inflation rate. Commodities returns are based on GSCI, equities on the S&P 500 total return index, govt bonds are the Barclays Aggregate US Treasury Index, high yield is the Barclays US Corporate High Yield Index, real estate is a combination of UK and US property prices, and utilities is the Dow Jones Utilities Average Index. “Guide to the Markets - UK”. Data as at 31 March 2014.
A turbo-boost for the UK market? Investment levels lagging the those seen in the previous three periods of recovery Low levels compared to pre-GFC High levels of corporate liquidity A return of investment may provide a turbo- boost to the UK market. Source: (All charts) ONS, FactSet, J.P. Morgan Asset Management. *Business investment is a sub component of gross fixed capital formation and measures investments made by businesses. **Start date for each period is peak prior to the beginning of the recession. “Guide to the Markets - UK”. Data as at 31 March 2014.
Cyclical indicators in the US may re-accelerate The data indicated a sharp slowdown in both the housing market and the auto sector in the first quarter as the freezing weather in the US heavily disrupted parts of the economy. Toward the end of the quarter we began to witness a sharp acceleration in auto sales as pent up demand began to materialise. A key risk to consumer demand remains a rapid rise in US government bond yields and a subsequent increase in borrowing costs. Source: (Top left) BEA, FactSet, J.P. Morgan Asset Management. (Top and bottom right and bottom left) Census Bureau, FactSet, J.P. Morgan Asset Management. Capital goods orders deflated using the producer price index for capital goods. SAAR is seasonally adjusted annual rate. “Guide to the Markets - UK”. Data as at 31 March 2014.
Cyclical indicators in the US may re-accelerate Household net worth at highest levels ever recorded. – The US consumer is feeling ‘flush’ 26% drop in debt servicing costs between 3Q ‘07 and 1Q ‘14 Housing markets in strong positive territory Source: (Top left) BEA, FactSet, J.P. Morgan Asset Management. (Top and bottom right and bottom left) Census Bureau, FactSet, J.P. Morgan Asset Management. Capital goods orders deflated using the producer price index for capital goods. SAAR is seasonally adjusted annual rate. “Guide to the Markets - UK”. Data as at 31 March 2014.
US corporate earnings The data indicated strong corporate earnings support of the S&P 500 Profits continue to rise Employment costs continue to fall Source: (Left and top right) Standard & Poor’s, FactSet, J.P. Morgan Asset Management. (Bottom right) BEA, FactSet, J.P. Morgan Asset Management. “Guide to the Markets - UK”. Data as at 31 March 2014.
Europe – a different picture The data indicated a lag between corporate earnings and the strong performance of European equities BUT - Slowdown in EM less of an issue for Europe than the US AND - Early signs of an uptick in profits from 4Q 2013 Source: (Left) STOXX, FactSet, J.P. Morgan Asset Management. (Top right) IMF, FactSet, J.P. Morgan Asset Management. (Bottom right) STOXX, Standard & Poor’s, FactSet, J.P. Morgan Asset Management. *Emerging markets includes all developing and emerging economies. “Guide to the Markets - UK”. Data as of 31 March 2014.
Japan – Huge levels of stimulus looks set to continue Shinzo Abe policy is driving recovery Rising inflation and wage growth QE currently 47% of GDP – 100% by 2018? Wage growth plus Yen deflation focuses the Japanese consumer on domestic goods. Source: (Top left) US Federal Reserve, Bank of England, Bank of Japan, ECB, FactSet, J.P. Morgan Asset Management. (Bottom left) Japan Ministry of Health, Labour, and Welfare, FactSet, J.P. Morgan Asset Management. (Right) FactSet, J.P. Morgan Asset Management. “Guide to the Markets - UK”. Data as at 31 March 2014.
Emerging Markets – Is 7% Chinese GDP a concern? Chinese auto sales now outstrip the USA Continued growth trend with growth of the mass affluent middle classes in China Huge capacity for continued growth Source: (Top) BEA, China Automotive Information Network, J.P. Morgan Asset Management. (Bottom) World Bank, J.P. Morgan Asset Management. *Brazil and India as at 2009. SAAR is seasonally adjusted annual rate. “Guide to the Markets - UK”. Data as at 31 March 2014.
Fixed Interest – The problem child? The data indicates the impact of a 1% rise in interest rates on various selected indices Poor returns in Sovereign and high grade corporate debt Diversification of client portfolios still a requirement Opportunity still remains in High Yield and EMD Source: (Both charts) Barclays, FactSet J.P. Morgan Asset Management. Fixed income sectors shown are provided by Barclays Capital and are represented by – Treasury UK: Barclays Sterling Aggregate Gilts Index; Floating Rate – Barclays US Floating Rate Notes (BBB); IG credit: Barclays Global Aggregate – Corporates Index; High yield: Barclays Global High Yield Index; EMD sovereign ($): Barclays Emerging Markets – Sovereigns index; EMD corporate ($): Barclays Emerging Markets – Corporates Index; EMD sovereign (LC): Barclays Emerging Market Local Currency Government Index. Change in bond price is calculated using both duration and convexity.
How dynamic is the investment process? Source: FTSE, MSCI, Barclays, Dow Jones/UBS, FactSet, J.P. Morgan Asset Management. Returns are in base currency of the index. Annualised period covers 2004 to 2013. Govt bonds: Barclays Global Aggregate Government Treasuries; HY bonds: Barclays Global High Yield; EMD: Barclays Emerging Markets (USD); IG bonds: Barclays Global Aggregate – Corporates; Cmdty: DJ UBS Commodity; REITS: FTSE NAREIT All REITS; World ex UK: MSCI World ex UK; All share: FTSE All Share; Cash: JP Morgan Cash United Kingdom (3M). Portfolio; 20%: All Share; 10%: government bonds; 15%: IG bonds; 15%: EM equities; 10%: World ex UK equities; 10%: HY bonds; 5%: EMD; 5%: commodities; 5%: cash; and 5%: REITS. “Guide to the Markets - UK”. Data as at 31 March 2014.
Summary It is important to demonstrate to clients investment expertise, knowledge and understanding of their financial goals Guide to the Markets helps you to have more engaged in-depth conversations with clients helping to build stronger relationships with them Access our materials online at www.jpmorgan.co.uk/insights
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