JP Morgan private bank has revealed what its rich clients think for the year ahead and there are little surprises.
JP Morgan's private bank has revealed what its rich clients think for the year ahead and there are few surprises.
In its latest private client survey nearly three-fifths - 58 per cent - of investors believe equities will be best performing class in 2015, up from 50 per cent a year ago. In second place came hedge funds, with 23 per cent of investors expecting alternative managers to perform well. Meanwhile 7 per cent of investors expect oil prices to perform, while the rest were divided between European core fixed income - 5 per cent - and US Treasuries at 6 per cent.
“Equities remain the most attractive asset class, with more than half of European clients agreeing that equities are the most promising asset class for the next 12 months. Given the general consensus that equities are the most promising asset class for 2015, we also note that most of our clients are significantly more positive on the US than other regions,” said César Pérez, chief investment strategist for JP Morgan Private Bank in EMEA.
“Our portfolio allocations are similarly structured, with US representing one of our main overweights. History suggests that US equity multiples have room to expand a little further if inflation remains around 1 per cent and 2 per cent. Therefore, we believe we are still in a sweet spot for US equity markets,” he added.
In terms of regions, sentiment for the European Union still looks poor. Two-fifths (41 per cent) said they were unsure about whether the EU had the ability to turn around its economy, with many pointing to France's weak performance as the reason.
“France is dragging down European growth. France has been slow to implement reforms for regulated professions or modernise its approach to state ownership. The OCED calculates that if France fully implements the structural reforms it has announced they would boost potential economic growth by 0.4 per cent a year over the next 10 years,” said Pérez.
Forty-five per cent of investors are convinced that for the eurozone’s economy to recover and return growth, the euro must fall against the dollar to $1.20. Almost a quarter (24 per cent) believe the rate should be $1.25, and only 4 per cent believe the eurozone’s economy can recover if the euro rises above $1.40.
When it comes to the emerging markets, 42 per cent of respondents believe investing through emerging market equities will yield the highest returns, while 38 per cent believe European multinationals are the best way to gain exposure. Just 12 per cent say emerging market debt is the best option, and only 8 per cent are optimistic on commodities.
Interestingly when it comes to the first US Federal Reserve interest rate hike, most investors believe it will occur between the second quarter 2015 (26 per cent) and third quarter (34 per cent). Almost a fifth think it will happen in the fourth quarter, while 9 per cent think it could happen in the first quarter. The remaining 13 per cent do not believe the Federal Reserve will increase rates any time soon and that the US could head back into recession.
The bank's survey was conducted between October and November 2014 across 17 leading European cities and Dubai, with more than 700 ultra-high and high net worth investors taking part.