In its latest report, JPMorgan Chase maintains a positive outlook on global equities due to resilient economic activity, strong corporate earnings momentum, and the likelihood that inflation expectations will not spiral out of control.
Regional allocation, it favors the US and Japan, South Korea and Taiwan, while being relatively less optimistic about Europe:
1. In terms of themes, it focuses on AI-critical industries and enabling companies, including cybersecurity, AI in the physical world, clean energy (including European nuclear energy, European renewable energy, and Asian energy storage systems ESS), modern warfare, and key mineral-related sectors. (AI-critical industries refer to sectors like memory and wafer foundry, while enabling companies include cloud providers, GPUs, and development platforms.) A multi-week period of factor rotation is expected, potentially leading to significant market volatility. Hedging with momentum options and buying on pullbacks is recommended.
2. On the other hand, it focuses on cyclical industries with long-term positive prospects, favoring European and Japanese banks, European industrials, Japanese machinery, general infrastructure, and the currently attractive European mining sector. Additionally, it recommends allocating to low-volatility sectors, particularly the European pharmaceutical sector. We recommend selectively going long on the consumer sector, especially in regions supported by the "wealth effect," such as South Korean consumer spending (tracked by the JPKBWEFT index), and tactically allocating to European luxury goods.
3. Avoid sectors vulnerable to AI impacts, and be bearish on European insurance, automobiles, chemicals, Asian consumer electronics, medical technology, and the German mid-cap index (MDAX), with a particularly negative outlook on the European chemical sector and Asian consumer electronics. (The above views are from a JPMorgan report dated August 4th.)
