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Episode 5: Will this February show us some love?Video

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Transcript Browser Title: Episode 5: Will this February show us some love? video

Description: What might move markets this month? See what we're thinking.

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Length (seconds): 636

Transcript: <h2>Note:</h2> <p>Intense electronic music plays.</p> <p>Legal disclosures appear.</p> <h2>On screen:</h2> <p>INVESTMENT AND INSURANCE PRODUCTS ARE:</p> <p>NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY• NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES</p> <p>SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED</p> <p>This video is for informational purposes only. Opinions expressed herein are those of the speakers and may differ from those of other J.P. Morgan employees and affiliates.&nbsp; Neither J.P. Morgan nor any of its affiliates can represent that the statements of opinion expressed will materialize. This material should not be regarded as research or as a J.P. Morgan Research Report. Nothing in this material shall be considered a solicitation to buy or an offer to sell securities, other investments or services to any person in any jurisdiction where such an offer, solicitation, purchase or sale would be unlawful under the laws of such jurisdiction.&nbsp; Any mention of an individual security, investment or strategy is provided for informational purposes only and should not be construed as a recommendation. Outlooks and past performance are&nbsp;not guarantees of future results. Please read additional important Information at the end of the video.</p> <h2>On screen:</h2> <p>J.P.Morgan logo.</p> <h2>On screen:</h2> <p>What's Moving Markets?</p> <p>Three ideas…Three guests…</p> <p>What's The Move? By J.P. Morgan.</p> <h2>On screen:</h2> <p>In a spacious white room, two stage-crew members adjust camera lights and set decorations. At the same time, a man with light brown hair, blue eyes, and a pink shirt, Ted Dimig, speaks to the viewer.</p> <h2>On screen:</h2> <p>Ted Dimig, Head of Investments, You Invest by J.P. Morgan.</p> <h2>Ted:</h2> <p>Welcome back to What's the Move? by J.P. Morgan. This is a series coming to you monthly where three guests discuss which events they think might move markets the most over the next month. And I'm your host, Ted Dimig.</p> <h2>On screen:</h2> <p>A graphic of a heart appears briefly over Ted's chest.</p> <h2>Ted:</h2> <p>Ah, February, the month of romance, candlelit dinners, roses and boxes of chocolate. Sadly, Valentine's Day has not shown much love to the S&amp;P 500, with positive returns only being generated 40% of the time since 1928. This month, will the market show us some love or leave us down in the dumps? Our three guests from J.P. Morgan will open their hearts and their minds to share some of their thoughts on this month's episode of What's the Move?</p> <h2>On screen:</h2> <p>Three ideas.</p> <h2>On screen:</h2> <p>Behind the scenes, Ted's three guests (two men and a woman) giggle and talk among themselves before the interview… then the woman with long blonde hair, Sam Azzarello, speaks to the viewer.</p> <h2>On screen:</h2> <p>Sam Azzarello.</p> <h2>Sam:</h2> <p>So I think February, it's all about politics, right? What else could it be besides politics?</p> <h2>On screen:</h2> <p>A man with dark hair, Hamilton Reiner.</p> <h2>On screen:</h2> <p>Hamilton Reiner.</p> <h2>Hamilton:</h2> <p>It’s stocks. You have to own stocks because in the long run, it's the only thing that's gonna give you a return.</p> <h2>Sam:</h2> <p>You're always talking about equities for the long run. February is about politics.</p> <h2>On screen:</h2> <p>A man with short hair and light eyes, Michael Schoenhaut, interrupts Sam and Hamilton.</p> <h2>On screen:</h2> <p>Michael Schoenhaut.</p> <h2>Michael:</h2> <p>This is about the search for income. That's what people care about in this type of market environment.</p> <h2>Sam:</h2> <p>Actually, I agree with Mike. It is about income, but also about politics.</p> <h2>Hamilton:</h2> <p>I agree with Mike too. It has nothing to do with politics, about income inequities.</p> <h2>Sam:</h2> <p>[mockingly] Wrong.</p> <h2>Hamilton:</h2> <p>You're not right Sam, equities.</p> <h2>On screen:</h2> <p>Hamilton and Sam walk toward the white room for their interview. Before joining them, Michael addresses the viewer, in a whisper.</p> <h2>Michael:</h2> <p>It's all about income.</p> <h2>On screen:</h2> <p>In the white room, Ted and his guests sit on white chairs around a glass coffee table.</p> <h2>Ted:</h2> <p>OK, ready? You know what they say. Guests are like a box of chocolates; you never know what you're gonna get. Well, today, folks, I'm pretty fortunate because I've got three wonderful guests, friends and colleagues from J.P. Morgan joining me for the February edition of What's the Move? Okay, Hamilton, we're going to start with you. 2019 was a phenomenal year for equities. Yet when I asked you what you should be focused on in February of 2020, you're still constructive on stocks. What's your view?</p> <h2>On screen:</h2> <p>Hamilton Reiner, Head of U.S. Equity Derivatives, J.P. Morgan Asset Management.</p> <h2>Hamilton:</h2> <p>Stocks are an important part of a well-diversified portfolio. And the fact is, even though 2019 was a very, very good year for stocks, hundreds of billions of stocks globally were sold. So people really were not along for the ride. So my view is that you need to find a way to get invested, stay invested, and not get shaken out regardless of the noise that may exist in February. When you look at stocks, there's a couple of nice tailwinds. Earnings look like they're going to be OK. The consumer is still alive and well. And the fact is, is that, year over year, earnings are probably pretty good for stocks. And given that tailwind, there is actually a pretty compelling reason why you still need, or want, rather, to have stocks in that well diversified portfolio.</p> <h2>Ted:</h2> <p>This is hands down, one of the most unloved bull markets that we've seen. There's always an excuse to sell. But if you're a long-term investor, if you're in a well-diversified portfolios, there's more benefits potentially in owning stocks then selling them all. OK. Speaking of noise, Sam-- actually, Sam is the first repeat guest on What's the Move?</p> <h2>Note:</h2> <p>Ted and the guests give Sam a small applause.</p> <h2>Ted:</h2> <p>So, don't screw it up this time. You may get invited back again. But speaking of noise, you've got a noise filled view about what people should be focused on in February. What is it?</p> <h2>On screen:</h2> <p>Sam Azzarello, Market Strategist, J.P. Morgan.</p> <h2>Sam:</h2> <p>So it’s interesting. Politics do not matter in the long run. We know that. But in the short run, politics can move markets. By the end of February, we're going to have a better idea of who the Democratic candidate for the election will be. So depending on if we see that it's more of a centrist candidate or a left leaning candidate, we can expect markets to at least react for that month. In particular, right, we think about certain equity sectors that are really impacted by government regulation. I'm thinking of health care, financials, energy, and technology this time around. These are things that could move more in February based on what the proposed candidate is saying.</p> <h2>Ted:</h2> <p>And what specifically is it about February that will introduce more clarity specific to the Democratic nominees?</p> <h2>Sam:</h2> <p>So you don't even have to be a policy wonk, right? Just what's happening in February is a bunch of the states, starting with Iowa on February 3rd, is kicking off their Democratic caucus, which is basically where delegates come together to hash it out in a room as to who the Democratic candidate should be. And if you think about it, right now there's a very diverse range of candidates, so there's a lot of market uncertainty. But perhaps by the end of February, we'll have a better idea of who the Democratic nominee is.</p> <h2>Ted:</h2> <p>More importantly, you're the first guest that has used the term wonk and caucus. So thank you again for that. OK, Mike, mad Mike. We're going to talk about income. In a world filled with savers, not a lot of places for people to ultimately look. What are you focused on in February and for the long run?</p> <h2>On screen:</h2> <p>Michael Schoenhaut, Head of Multi-Asset Income Strategies, J.P. Morgan Asset Management.</p> <h2>Michael:</h2> <p>Yeah Ted, I mean, it's been an incredibly challenging environment for savers and investors who are looking for income. A lot of the traditional ways that people used to earn their income just aren't delivering. I mean, remember when CDs used to deliver 5% or more government bonds? We're just not in that type of environment anymore.</p> <h2>Ted:</h2> <p>My favorite day was to go to the local Chase branch with my grandpa and my savings passport, and they would stamp it, and I would see interest.</p> <h2>Michael:</h2> <p>Absolutely. You're not getting much today. And it's even worse overseas where you have more than $10 trillion of bonds that are negative yielding. At the same time, about half of global government bonds are yielding less than 1%. So this is not going to meet the needs of many income investors. So in order to get the income that many people are looking for, it means that they might need to take more risk than they're used to.</p> <h2>Ted:</h2> <p>One of the areas that people also tend to think about when it comes to income is real estate. Do you have a view specific to real estate? Any opportunities there?</p> <h2>Michael:</h2> <p>Real estate can be an attractive income provider, but direct real estate does have a liquidity challenge. So if you need cash, if you need to be able to take out money, real estate can create some challenges for you. But there are ways to access the real estate market through instruments called REITs – Real Estate Investment Trusts – which can give you an equity-like exposure to an underlying real estate.</p> <h2>Ted:</h2> <p>So be flexible, be diversified. It's one of the only ways that you're going to be able to generate income if you're an income investor. Okay, Sam, you travel the globe. We were recently in Vancouver. You spend lots of time with financial advisors and their clients. What are some of the most frequent questions and concerns that you're hearing when you're in the field?</p> <h2>Sam:</h2> <p>I think the main question right now has been around the equity bull market, right? And can this keep on going? 2019 was great and I would argue is kind of unexpectedly great that the market was up so much. But going into 2020 clients are really asking us, “Can this continue on?” right? “Can stocks keep moving higher?” And I think it's actually a question that should be posed to Hamilton, who loves stocks.</p> <h2>On screen:</h2> <p>Sam turns toward Hamilton, who smiles slightly.</p> <h2>Hamilton:</h2> <p>I do. And when I think about the market at this point, it's far from euphoric. As Ted said, it's actually been the most hated bull market almost of all time. Valuations don't appear to be overly euphoric. And you still, as Michael said, I mean income is an important part of a well-diversified portfolio. And in large cap U.S. stocks, right now, the dividend yield is actually above what the 10-year bond is giving you. So you actually get the benefit in a well-diversified portfolio, of owning U.S. stocks, and you also get the dividend kicker, if you will.</p> <h2>Michael:</h2> <p>And if you're willing to look outside the US, both in developed equity markets but even emerging equity markets, you can get even higher yields and more attractive dividend yields.</p> <h2>Sam:</h2> <p>And I think for those who are slightly less comfortable with how much the markets run, I'm a big believer in dollar cost averaging in, right? Put that money to work slowly but steadily and consistently every month. And then when you don't have to worry about monthly market noise. You can just keep getting in the market. And like you said, getting and staying invested is the most important thing.</p> <h2>Hamilton:</h2> <p>And regardless of how February goes, either way, you're putting a portion of that money to work. So if it goes well, you got some money to work. And if it doesn’t go well, you actually got it at a lower level.</p> <h2>Ted:</h2> <p>So there's always risks when it comes to investing. But having a longer-term focus, having a disciplined plan to continue to do what you want to do, being diversified, opportunistic are all things that can help minimize some of the risks that'd come with investing. OK, I want to thank you guys for joining us for the February episode of What's the Move?</p> <h2>On screen:</h2> <p>What to think about in February -</p> <p>Own stocks</p> <p>Politics</p> <p>Income strategies</p> <h2>Ted:</h2> <p>Again, these are not trade recommendations. These are just these three friends, colleagues and J.P. Morgan professionals’ personal opinions of what might drive markets the most for the month of February. So if you guys have been watching and some of you have been here before, every episode we do something I call the seasonal surprise. And since it is February, what takes place in February?</p> <h2>Hamilton:</h2> <p>Presidents Day.</p> <h2>Ted:</h2> <p>President's Day.</p> <h2>Michael:</h2> <p>Groundhog’s Day.</p> <p>Side note:</p> <p>The speakers lightly laugh.</p> <h2>Ted:</h2> <p>Groundhog Day. You both are right. But it's also Valentine's Day. So are any of you archers?</p> <h2>On screen:</h2> <p>Question mark graphics appear over the guest's heads.</p> <p>Side note:</p> <p>Jazz music plays.</p> <h2>On screen:</h2> <p>Suddenly, a fast-paced video montage shows the gang preparing to shoot rubber darts at a board with four concentric hearts. An off-screen announcer introduces the game:</p> <p>Announcer:</p> <p>Hug or Bug?</p> <h2>On screen:</h2> <p>Step 1: Aim and Shoot.</p> <p>Step 2: Hit the target.</p> <p>Step 3: Eat a Bug.</p> <h2>On screen:</h2> <p>Sam hits the center-heart-bullseye…and &quot;wins&quot; a small chocolate-covered scorpion! She puts it in her mouth…</p> <h2>Note:</h2> <p>A scream sound plays.</p> <h2>On screen:</h2> <p>Hamilton shoots a dart, which goes springing off the top edge of the board. So he takes the dart and sticks it onto the board by hand! Next, Michael shoots a dart which hits the far corner of the board…he gets a lollypop with an insect inside it! He stares at the lollypop... which Ted grabs and eats! A heart surrounds a badge, with a picture of Ted's face and the text: &quot;I ate a bug *.&quot;</p> <h2>On screen:</h2> <p>J.P.Morgan logo.</p> <h2>On screen:</h2> <p>You Invest is a business of J.P. 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