JPMorgan less certain than RBA on recovery

Just a day after the Reserve Bank of Australia (RBA) lifted interest rates in the expectation of broader economic recovery, a major private bank has revealed it is positioning for deceleration in the global economy in the second half of next year.

JP Morgan’s private banking arm in Asia has told a Reuters Global Wealth Management Summit in Hong Kong that it is staying underweight in equities in the expectation of the deceleration.

The bank declared that it was favouring alternative return drivers that were less dependent on growth, such as hedge funds, commodities, currencies and credit, and beefing up its cash holdings instead.

JP Morgan Private Bank in Asia chief strategist Ivan Leung told the summit this was partly to do with how the bank saw the next six to 12 months and partly to do with the risk sensitivity of its clients.

Leung said the bank was 4 per cent underweight on equities, 8 per cent overweight on hedge fund strategies and 5 per cent overweight on cash when compared with a balanced portfolio that has a 40 per cent allocation to equities, 40 per cent to fixed income and 20 per cent to alternative assets.

"The rising tide has lifted all boats, but once the policy measures begin to fade out, we may see that the US consumer is still impaired and this has been a jobless growth," Leung said. "I'm not betting against the US consumer, but I don't want to bet my clients' money on them either.”