CIO Insights featuring Alexander Wolf, Head of Investment Strategy for Asia, J.P. Morgan Private Bank

CIO Insights featuring Alexander Wolf, Head of Investment Strategy for Asia, J.P. Morgan Private Bank

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Leaving behind a year of volatility and unpredictability, the scope to find steadiness while also staying focused on long term yields remains a priority for investors. To help our readers as well as global investors keep pace with new investment themes and avenues, Global Private Banker interviewed Alexander Wolf, Head of Investment Strategy for Asia, J.P. Morgan Private Bank. In our conversation, we covered trends poised to reshape investments, what to expect from global markets, while also shedding light on how Private Banks are set to change the way they service their clients.

Macro-economic indicators: Supportive Policy, strong exports and Chinese credit growth will further drive economic recovery

Supportive policy, both fiscal and monetary, has been a key component behind the economic and market recovery. Further, dialogue over additional fiscal stimulus in the US as well as monetary policy decisions from major central banks will be key indicators over how much more policy support can be expected. Considering the macro data perspective, trade date will also be a key indicator as to the pace of the recovery. Exceptionally strong exports have been an important factor for the recovery in Asia, and this is mostly driven by demand in the US as well as the global rotation towards spending on electronics. Further to this, how trade shapes up will be another indicator as to the pace of the recovery and whether Asia can continue to outperform. Lastly, Chinese credit growth will be a key factor. Policy in China has already started to normalize as the economy improved and the withdrawal of policy support is a potential headwind for emerging markets and commodities.

Geopolitics: Uncertainty will continue to plague US-China relations

From a geopolitical perspective some policy changes by the United States have become clearer, but with most of the focus on domestic policy, it’s yet unclear how foreign policy priorities will shape up. What does seem evident is the willingness of the Biden administration to engage more with the rest of the world following four years of quasi-isolationism, this means re-joining the Paris Climate Accord, and rebuilding alliances. Policy towards China could continue on a broadly similar trajectory albeit with different tactics likely resulting in less focus on tariffs. However, this aspect of foreign policy is still under review as the new team settles into place and the full scope of China policy has yet to emerge. For investors, issues like market access, tariffs, export restrictions, and sanctions all have had a big impact over the past four years. How the new administration chooses to remove or continue these policies will continue to be impactful; however, as mentioned above they have yet to determine exactly how they will proceed. Beyond geopolitics the focus on renewables and environment, as well as fiscal policy and infrastructure stimulus, will also be impactful for global investors.

Asset Allocation: Asia and US will continue to demonstrate growth

Equities remain broadly favourable over bonds. Within equities we favour cyclicals over the near term, particularly industrials which are in line with our view of above consensus growth. Geographically speaking Asia and US remain favourable. Deep-diving further into Asia we prefer China, Hong Kong, Korea, Singapore, and India to get a mix of structural growth outperformance in NE Asia and the cyclical outperformers in South and Southeast Asia that will benefit from continued re-opening and economic normalization. Within fixed income we favour credit over duration and recommend moving out the risk spectrum favouring high yield in both the US and Asia over investment grade.

Investments: Technology, environment and global real estate will generate returns

Key themes: Three megatrends that will shape 2021 & beyond are digitalization, healthcare technology, and the environment. Speaking of long term exposure in each of the above mentioned themes, we believe growth in data will continue to drive growth in AI, cloud, and cybersecurity. In healthcare, aging populations and continued innovation in areas like gene therapy will create investment opportunities. Considering the awareness around environment and the shift from carbon to electrification – a defining shift over many years, new opportunities in renewables, clean tech, and environmental services will favour investors.

Alternatives becoming an increasingly attractive source of income: With rates as low as they are, and likely to remain low in our view, we recommend considering real assets and alternatives as sources of yield. Within real assets both global real estate and infrastructure are attractive. The property sector has been a bright spot amid the recovery and given low vacancy rates and low supply, we expect construction to remain a source of growth in many countries. The same goes for infrastructure where we see supportive fiscal policies. Both offer attractive risk-adjusted returns.

Investing for the global low carbon transition: There is a clear investment opportunity driven by increased government awareness and supportive policy, supportive economics around renewables, and geopolitical drivers to reduce energy dependence on carbon sources. To re-iterate further, the drive towards de-carbonization is a long-term shift and represents a significant investment opportunity. 

Private Banking in the future: Digital platforms and social channels will further enhance client service

Many of the shifts towards remote working and adoption of digital platforms will remain post-pandemic. In terms of implementing and adopting new trends to better service J.P. Morgan Private Bank’s client requirements,  we recently became the first private bank to offer our clients a WhatsApp broadcast service. Our bi-lingual WhatsApp broadcast channel is offered to clients who’ve indicated they wish to hear from us on this platform, hence receiving timely insights from us. For example, we send our clients a weekly market commentary covering our views on the latest global and regional investment themes. The move to a more standardised yet regular interaction with our clients has been well received.

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