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Rate-cutting playbook: Investment strategies for offense and defenseVideo

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Video ADA Text: Rate-cutting playbook: Investment strategies for offense and defense video

Transcript Browser Title: Rate-cutting playbook: Investment strategies for offense and defense video

Description: Here’s why you should position your portfolio for a potential September rate cut.

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Video Id: 6360469893112

Audio Description Video Id: 6360469490112

Length (seconds): 130

Transcript: <h2>Side note:</h2> <p>Background music plays.</p> <h2>On screen:</h2> <p>This video opens on a man in glasses and a blazer, speaking from an office with a bookshelf.</p> <h2>Side note:</h2> <p>A bold disclaimer appears in a text box:</p> <h2>On screen:</h2> <p>INVESTMENT AND INSURANCE PRODUCTS:</p> <ul> <li><p><strong>NOT A DEPOSIT</strong></p> </li> <li><p><strong>NOT FDIC INSURED</strong></p> </li> <li><p><strong>NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY</strong></p> </li> <li><p><strong>NO BANK GUARANTEE</strong></p> </li> <li><p><strong>MAY LOSE VALUE</strong></p> </li> </ul> <h2>Federico Cuevas:</h2> <p>Here are your Top Market Takeaways.</p> <h2>On screen:</h2> <p>A circle with a title expands:</p> <h2>On screen:</h2> <p>Top <strong>MARKET TAKEAWAYS</strong></p> <p>AUGUST 16, 2024</p> <h2>On screen:</h2> <p>An identifying text box appears over the speaker:</p> <h2>On screen:</h2> <p><strong>FEDERICO CUEVAS</strong></p> <p>GLOBAL INVESTMENT STRATEGIST</p> <p>J.P. MORGAN WEALTH MANAGEMENT</p> <h2>Federico Cuevas:</h2> <p>The market narrative has recently shifted from pricing in a soft landing to fears of a hard landing. The main driver: the latest U.S. labor market print came in softer than expected, triggering the infamous &quot;Sahm Rule.&quot; Let's break it down.</p> <h2>On screen:</h2> <p>A question appears over gray: 'What is the so-called &quot;Sahm Rule&quot;?'</p> <h2>On screen:</h2> <p>A line graph appears, titled: 'The Sahm rule was triggered, % difference to 12-m low in unemployment rate, 3-MMA.' On the graph, the vertical axis ranges from -1% to 5%, and the horizontal line ranges from '80 to '20. Gray bars representing 'Recession' appear twice between '80 and '85, then again around '92 and '02. A thicker gray bar appears between '08 and '10. While a dotted line represents the 'Threshold: 0.5%', a solid line representing 'Change in unemployment rate,' spikes at or around each gray bar: the first two in the early '80s around 2%; the third around '92 at about 1.5%; the fourth around '02 also at about 1.5%; and the last one around '09 at about 4%. Just after '20, the solid line spikes again, reaching past the 5% mark. In between spikes, the solid line hovers around 0%.</p> <h2>Side note:</h2> <p>Small text below the graph reads:</p> <h2>On screen:</h2> <p>Source: BLS, Haver Analytics. Data as of July 31, 2024.</p> <h2>Federico Cuevas:</h2> <p>The rule says that if the unemployment rate goes up by more than 0.5% compared to the lowest level in the past year, it means we're either in a recession or about to enter one. Although the July jobs report came in softer than expected on nearly every metric and the unemployment rate hit 4.3%, we think investors may be overstating labor market weakness.</p> <h2>On screen:</h2> <p>A question appears over gray: 'How did markets initially react?'</p> <h2>Federico Cuevas:</h2> <p>Volatility spiked; equities sold off; and U.S. Treasury yields took a dive across the curve.</p> <h2>On screen:</h2> <p>Another graph appears, titled: 'S&amp;P 500 intra-year declines (max drawdowns) and calendar year price returns, %.' The vertical axis ranges from -55% to 35%, and the horizontal axis ranges from '80 to '24. Dark blue bars representing 'Calendar Returns' start at 26% in '80 with light blue dots indicating 'Max Drawdown' starting at -17%. Calendar Returns drop to -10% in '81 with a Max Drawdown of -18%. The following years all have positive Calendar Returns at 15% or higher with dips to near-zero percent in '84 and '87. There's a peak in '89 at 27%, followed by a trough in '90 at -7%, and another peak of 26% the following year. Calendar Returns remain low through '96, then peak at 34% without a trough until '01, when they dip to -10% and stay negative until '03. The early aughts show smaller peaks and troughs, followed by a more dramatic trough in '08 at -38%. In '09, Calendar Returns climb to 23%, with regular peaks and troughs through the teens. The latest negative Calendar Return was in '22, at -19% with a Max Drawdown of -25%.</p> <h2>Federico Cuevas:</h2> <p>Important to note, markets are now pricing in more than a full percentage point worth of Fed rate cuts by year-end. Volatility is normal: the average year that ends with a gain comes with an 11% peak-to-trough decline.</p> <h2>On screen:</h2> <p>The view shifts to the end of the graph, showing a 24% Calendar Return (with a Max Drawdown of -10%) in '23 to a 10% Calendar Return (and a Max Drawdown of -8%) in '24. Orange text to the side reads: '11% average peak-to-trough decline.'</p> <h2>Side note:</h2> <p>Small text below the graph reads:</p> <h2>On screen:</h2> <p>Source: FactSet, S&amp;P, JPMorgan Asset Management - Guide to the Markets. Returns are based on price index only and do not include dividends. Intra-year drawdowns refer to the largest market declines from a peak to a trough during the year. Returns shown are calendar year returns from 1980 to present year. Data as of August 7, 2024.'</p> <h2>On screen:</h2> <p>A question appears over gray: 'Why do we think labor market weakness is overstated?'</p> <h2>Federico Cuevas:</h2> <p>The three main reasons are:</p> <h2>On screen:</h2> <p>A list with three fields appears beside him.</p> <h2>On screen:</h2> <p>01 reads: 'Monthly job additions have slowed but is still consistent with pre-COVID levels.'</p> <h2>Federico Cuevas:</h2> <p>Number one, the pace of monthly job additions has slowed, but it's still consistent with pre-COVID levels.</p> <h2>On screen:</h2> <p>02 reads: 'Largest driver has been new people entering labor force + spike in temporary layoffs that may be due to weather.'</p> <h2>Federico Cuevas:</h2> <p>Number two, the largest driver has been new entrants into the labor force (think immigration), and a spike in temporary layoffs that may be due to weather.</p> <h2>On screen:</h2> <p>03 reads: 'We aren't seeing spiraling weakness in Challenger Job Cuts report, initial unemployment claims or company references to layoffs.'</p> <h2>Federico Cuevas:</h2> <p>And, number three, we're not seeing spiraling weakness in other datasets such as the Challenger Job Cuts report, initial unemployment claims, or company references to layoffs.</p> <h2>On screen:</h2> <p>A question appears over gray: 'What can investors consider as they think about their portfolios?'</p> <h2>Federico Cuevas:</h2> <p>Our base case continues to be that we're in for a soft landing, which means that there could be more upside ahead in the stock market. That said, you might consider taking advantage of pullbacks to phase into portfolios. And most of all, assess your investments in the context of their roles within a larger wealth plan.</p> <h2>On screen:</h2> <p>Three triangular bullet points appear under a title:</p> <h2>On screen:</h2> <p><strong>KEY TAKEAWAYS</strong></p> <ul> <li>The average year that ends with a gain comes with an 11% peak-to-trough decline. Volatility is normal!</li> <li>The Sahm Rule may be the latest &quot;foolproof&quot; recession indicator to be a false positive. Our base case continues to be a soft landing ahead.</li> <li>Consider taking advantage of pullbacks to phase into portfolios while assessing your investments in context of their roles within a larger wealth plan.</li> </ul> <h2>Federico Cuevas:</h2> <p>For more information, please visit chase.com/theknow</p> <h2>On screen logo:</h2> <p>A logo appears over gray: J.P. Morgan WEALTH MANAGEMENT.</p> <h2>On screen:</h2> <p>To learn more, visit chase.com/theknow.'</p> <h2>On screen:</h2> <p>An oval around the URL turns from white to blue.</p> <h2>Side note:</h2> <p>Legal disclaimers.</p> <h2>On screen:</h2> <p>All market and economic data are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.</p> <p>The views, opinions, estimates and strategies expressed herein constitutes the speaker's judgment based on current market conditions and are subject to change without notice, and may differ from those expressed by other areas of J.P. Morgan. This information in no way constitutes J.P. Morgan research and should not be treated as such. You should carefully consider your needs and objectives before making any decisions --including whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with any investment or financial service, product or strategy prior to making an investment decision. For additional guidance on how this information should be applied to your situation, you should consult your advisor.</p> <p>Investing in securities involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.</p> <h2>Side note:</h2> <p>A disclaimer in bold reads:</p> <h2>On screen:</h2> <p>(In bold) <strong>Outlooks and past performance is not a guarantee of future results.</strong></p> <p><strong>Past performance is no guarantee of future results.</strong></p> <h2>Side note:</h2> <p>The final disclaimers in regular font read:</p> <h2>On screen:</h2> <p>Investment in alternative investment strategies is speculative, often involves a greater degree of risk than traditional investments including limited liquidity and limited transparency, among other factors and should only be considered by sophisticated investors with the financial capability to accept the loss of all or part of the assets devoted to such strategies.'</p> <p>Asset allocation/diversification does not guarantee a profit or protect against loss.</p> <p>J.P. Morgan Wealth Management is a business of JPMorgan Chase &amp; Co., which offers investment products and services through <strong>J.P. Morgan Securities LLC</strong> (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase &amp; Co. Products not available in all states.</p> <p>Copyright {{copyrightCurrentYear}} JPMorgan Chase &amp; Co.</p>

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