The $ 3.6 trillion fund manager, one of the largest in the world, believes investors will look beyond traditional asset classes to generate higher returns, thereby increasing participation in investments such as private equity.
Income-seeking investors have become the big losers in central bank policy.
“The outlook for negative or very low real rates on core government bonds unfortunately means there is no relief for those looking for income,” said Kerry Craig, Global Markets Strategist for JPMorgan Asset Management .
JPMorgan has raised its long-term global inflation forecast to 2.4% per year, given the sharp rise in consumer prices recorded in the United States and Europe in recent months.
In Australia, JPMorgan expects inflation to remain contained due to “cyclical hurdles” that will provide a cover for the sharp rise in prices.
To withstand the dismal performance of government bonds, income investors may find refuge in real assets such as infrastructure, real estate and transportation, which offer less liquidity than typical fixed interest assets but may offer a consistent performance, said Craig.
“There is a tradeoff around liquidity, but investors will have to be more critical in deciding how much liquidity they really need in their portfolios,” he added.
JPMorgan’s forecast is supported by global and regional growth assumptions that forecast the global economy to grow 2.2% in 2022, with developed market economies growing 1.5% and Australia outperforming its peers to grow. in accordance with global forecasts.
Global fund manager Schroders believes equity markets have become overvalued as a result of the injection of liquidity from central bank bond buying programs that flooded financial markets during the pandemic.
“All that liquidity is starting to drive up prices, housing markets have exploded everywhere and the stock markets have gone crazy – not exactly what you think would happen when we just came out of a pandemic with decimated economies, ”said Martin Conlon, head of Australian equities for Schroders.
The exuberance is acute among the hordes of retail investors who have joined the rally, propelling it further and creating dangerous behavior in corners of the stock market that have broken away from any sense of reasonable value, he said. he declares.
“Many areas of the stock market have degenerated into gambling now. We are pushing the envelope rather than looking at a company’s core value and how much money it can realistically make.
“There are a lot of danger signs that suggest we are absolutely in a bubble market now.”
Despite concerns about value, the London-based fund manager, who oversees $ 1.3 trillion in assets, believes investors may find opportunities in Australian and global equities.
Healthcare, infrastructure and businesses that stand to benefit from the energy transition are among the areas of the stock market that investors can look forward to for further gains, Conlon said.
“Energy is the lifeblood of everything we do and use, so if that price goes up, most other prices are likely to go up,” he said.