Global Markets Strategy26 February 2024J P M O R G A Nwww.jpmorganmarkets.comThis material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. Global Markets StrategyMarko Kolanovic, PhD AC(1-212) 622-3677marko.kolanovic@jpmorgan.comJ.P. Morgan Securities LLCThomas Salopek AC(1-212) 834-5476thomas.salopek@jpmorgan.comJ.P. Morgan Securities LLCBram Kaplan, CFA AC(1-212) 272-1215bram.kaplan@jpmorgan.comJ.P. Morgan Securities LLCNikolaos Panigirtzoglou AC(44-20) 7134-7815nikolaos.panigirtzoglou@jpmorgan.comBloomberg JPMA FLOW J.P. Morgan Securities plcMika Inkinen AC(44-20) 7742 6565mika.j.inkinen@jpmorgan.comJ.P. Morgan Securities plcFederico Manicardi AC(44-20) 7742-7008federico.manicardi@jpmorgan.comJ.P. Morgan Securities plcAmy Ho AC(1-212) 270 0331amy.ho@jpmchase.comJ.P. Morgan Securities LLCYTD returns by assetSource: J.P. Morgan.Cross-Asset Strategy: Investor optimism is high and positioning is elevated, as a goldilocks outcome (or better) has become consensus. However, inflation risks are skewed to the upside given given loose financial conditions, tight labor markets and easy fiscal policy, which could keep the Fed higher for longer. Additionally, the narrative could turn from goldilocks toward 1970s-style stagflation given geopolitical headwinds to global trade that could be exacerbated by the Nov US election. In a reversal of the 1980s to 2000s when the West was enjoying positive feedback loops from the �peace dividend�, expanding trade and importing disinflation from Asia, we have the risk of this being replaced by a �conflict tax�, de-globalization, and on/friend-shoring inflation. The re-pricing of Fed expectations and neutral bond positioning suggest there is scope for yields to decline over the medium term, so we stay long 5Y USTs, 5s/30s steepeners and 2s/5s flatteners. Stronger-than-expected Euro area flash PMIs and push-back from ECB speakers on near-term easing expectations contributed to a bear-flattening, and we hold longs in 5Y Germany. US HG bond spreads are trading in a narrow range recently despite a record pace of supply and spreads close to post-GFC tights. In European Credit, inflows continue to drive spreads tighter despite disappointing total returns YTD, though we don�t yet see evidence of extreme crowding. In FX, USD can consolidate now that Fed easing exuberance is mature. Base metals supply is beginning to break, pulling bullish tipping points into clearer view. US natural gas price fell to levels not seen since 1995, with the milder weather forecast causing the storage trajectory to rise.JPM Clients� View: Click here to take this week�s survey. This week we poll investors on CPI, NVDA, China equities and ...
