A look at the four points of the globe to look for yield. At the Salone del Risparmio in Milan, an Assogestioni event at the Bocconi University, four managers connected from Hong Kong, London, New York and Sao Paulo recounted JpMorgan's worldview.
From its New York headquarters the business house believes that the US economy is doing surprisingly well despite the fiscal issue: by the end of 2013 the economy will recover more sustained and the Fed will ease its support measures in the face of an economy that will sustained growth. Furthermore, the issue of the debt ceiling is destined to generate less tension on the markets than in the past, tensions that led to two sell-offs first in 2011 and then with the fiscal cliff in 2012: investors are no longer as concerned as they used to be with negotiations taking place in Washington. And in this scenario, the Wall Street rally may have room to continue. The stock market, JpMorgan points out, has returned to its highest levels but is cheaper than in 2007 and 2000. The sectors that will attract the most attention will be technological and financial: stocks that are now at a discount may have better performances.
On the other hand for JpMorganIn general, equities remain an important asset class in terms of the search for yields and in 2013 it will be important to combine the broad diversification approach with that of the search for yield and value. "An optimal combination of equity and high-yield bond asset classes can allow for the generation of good income flows that can be periodically monetized according to the consumption needs of investors", notes JpMorgan for which shares can constitute sources of income "both from point of view of capital appreciation and expected dividend flows”. Already in the second half of 2012, crisis management policies in Europe fueled a strong recovery in risk appetite and investors are reducing their exposure to liquidity and low-risk asset classes and redirecting themselves towards asset classes with a higher efficient risk and return profile. And the equity markets have benefited from this rotation. But despite the rally of recent months, equities have not exhausted their potential, even if 2013 performances will probably be lower than those of 2012 and we should expect periods of correction. This is because in relative terms the valuations of equities are lower than those of bonds and the levels of dividend yields are very high.
And also in Europe there are high-yield stocks. Europe's difficulties, and a crisis whose resolution will certainly not be quick and easy, do not prevent good returns from shares. JpMorgan points out that in the last four years the stock market has doubled against zero growth driven by 1/3 investment in dividends. The thirst for performance was in fact a very important factor. And 90% of the stock market is made up of corporate companies and not banks, with companies that are in a solid position: in this situation, the last thing management wants to do is cut dividends, indeed today one of the main points is do anything at least to keep the coupons.
From Asia the novelty than in the past is that Asians themselves are buying their market. The Asia Pacific High Yield Balanced Income Fund raised $4 billion from local clients. The theme of Japan then emerges preponderantly. JpMorgan has also updated its projections on the country and is directing clients to that area, which represents a structural and not a tactical opportunity. The house business remains positive overall across Asia even as it has reduced its risk component. There is certainly more optimism for China than for India. In Beijing, the political transition has ended and JpMorgan believes that the negative cycle on the country is over: for this reason, investors should stay. On the contrary, all the news from Mumbai is negative: it is not excluded that a phase of improvement could begin but for now the advice is to limit yourself to monitoring carefully. Emerging markets also means Latin america. However, the last two years have been difficult for Brazil. The economy, thanks to a series of incentives, then recovered again but not as one might have expected. In any case, the lack of growth would already have been priced into by the market. JpMorgan experts are positive on infrastructure while cautiously eyeing commodities on unknown demand from China. From this point of view, going from the price list index is not the best solution because the predominant weight concerns raw materials.
THE LIVE SURVEY AMONG THE OPERATORS PRESENT AT THE SHOW
The operators present at the conference ""Hunting for yield: the vision of the world, concrete solutions" then ventured into a sort of live survey. It emerged that operators in 2013 intend to keep their overall exposure stable US market (about 51% of those who responded) against 36% who will increase their exposure. A choice that can be explained by the fact that exposure to this area is already widespread among operators. At the same time, 60% believe that the Dow Jones will end 2013 up between 5 and 10%, against 27% who see it stable and 12 who see it down by 5-10%. Across the Atlantic, however, the sectors considered most attractive are not equities (attractive for 38% of respondents) but high-yield corporate bonds (54,4% of respondents). Only far behind bonds (4,4%). With regard to Europe, around 42% declared that in 2013 they intend to increase their exposure to the Old Continent while 35% will remain stable. 71% of those interviewed see the European market growing at the end of 2013 between 0 and 10%, only 14% see it over 10% but also only 11% see it declining. Conversely, the exposure to government bonds in the euro area will decrease for most operators. In the end, Latin America it doesn't completely convince investors: only 34% intend to increase exposure while 48% will remain stable and 17% will reduce it. In this area, investors' preferences are divided between shares (39%), bonds in local currency (25,8%) and corporate or high yield bonds (37%).
