- JP Morgan's EMEA chief market strategist, Karen Ward, explains why clients should be maintaining balance in their portfolio and should continue to consider the various policy options of each outcome.
- Ward is asking investors to think about what are the really game changing investment opportunities in the next five years and whether the current US election volatility creates opportunities in this space.
- "So I think, again it's that keeping our heads, not getting lost in the noise and news, keeping our focus on the secular trends," Ward said.
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JP Morgan's EMEA chief market strategist for its asset management division, Karen Ward, woke up to yesterday morning's US election results without "shock and awe".
Ward had been advising clients not to rely purely on the polls and was prepared for the outcome to potentially look different from the predictions.
It turns out that markets hadn't relied much on the polls at all and were pricing in a Democratic sweep that didn't happen, driving an avalanche of dollars into anything from government bonds, to technology stocks and cryptocurrencies.
Joe Biden failed to secure Florida and the chances of a "blue wave" seemed less likely and the race for the presidency narrowed.
The outcome is now dependent on the results from a few key states, such as Georgia, Arizona and Pennsylvania. However, because of the number of mail-in ballots this year, the counting of votes will continue into Thursday morning.
The uncertain status of results gave Ward a chance to reiterate sentiments made to clients about maintaining balanced portfolios, advice which she was providing to clients ahead of the US election.
"We were emphasising again, balance, if you've got really binary outcomes, then you know, you don't want to be heavily swayed in one direction or the other, because you could be offside," Ward said.
Investors should still be thinking about the various possible policy outcomes of any different results and what that means for their portfolio, Ward said.
Read More: Strategists at JPMorgan's $1.9 trillion asset management arm share 5 investing tips for navigating the fast-approaching election — including the sectors poised to profit from every possible outcome
But in the meantime as investors await clarity on the results, they should look to capitalize on long-term opportunities at a lower price, Ward said.
"What do you really think are the game changing investment opportunities for the next five years?" Ward said. "We will see, I think, attitudes, policy and regulation towards climate change, really increasing momentum. Okay, so what are the companies that are providing the solution to those kinds of secular opportunities?"
Investors should leverage the volatility to capitalize on what they are confident on as the key secular trends.
Ward identified e-commerce and the home improvement space as secular trends the firm is very comfortable with and will be watching to see if market volatility enables them to capitalize on these opportunities at cheaper prices.
In addition to keeping track of secular opportunities. Investors should keep their eyes on the 10-year Treasury, Ward said. This will be a way to make sense of the markets amid the newsflow.
"I think the US 10 year tells you a lot about how the market is digesting, what the result will mean, for the economy and for policy," Ward said. "I think that's the number to keep the eye on."
Yields on the 10-year Treasury note posted their biggest one-day fall since late March on Wednesday, dropping by 14 basis points to its lowest in about three weeks, as investors flocked into fixed income assets. The S&P 500 rallied by 2.2%, in what analysts said was its largest post-election gain of all time.
However, the bottom-line is investors should use the next 48 hours to 72 hours to capitalize on this kind of volatility to gain access to investment opportunities they are confident in and avoid the noise.
"I think if anything, probably a lot of the perhaps eye catching headlines today will end up being sort of non influential over the coming weeks," Ward said. "So I think, again it's that keeping our heads, not getting lost in the noise and news, keeping our focus on the secular trends."
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