Themes and implications from the Global Fixed Income, Currency & Commodities Investment Quarterly meeting
In brief
- Our base-case scenario, a 75% probability of Above Trend Growth, remains unchanged, underpinned by global economic strength, evidenced by growth in U.S. and global corporate profits, along with stable to improving credit card receivables and municipal tax receipts.
- We expect the Federal Reserve (Fed) to continue its gradual hiking cycle, with the fed funds rate ending the hiking cycle at around 3%.
- A significantly stronger dollar remains a risk to global markets, especially within emerging markets.
- Volatility across markets is likely to increase as the market transitions from quantitative easing (QE) to quantitative tightening (QT).
- We continue to own credit: Short-duration securitized credit remains our favorite market, given the strong U.S. consumer. The leveraged credit market (bonds and loans) is attractive as the corporate market benefits from expected revenue growth. We remain cautious on U.S. rates, with the increase in supply potentially weighing on the market as the Fed unwinds QE.
Scenario Probabilities (%)
Source: J.P. Morgan Asset Management. Views are as of June 6, 2018.
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