SINGAPORE (Reuters) - Fund manager J.P. Morgan Asset Management upgraded its outlook on global stocks on Monday, pointing to hopes for a breakthrough in Sino-U.S. trade talks, a reduced risk of a U.S. recession and a moderately positive earnings outlook.
The call, from the manager of $1.8 trillion in assets, comes as U.S. stock markets sit at a record high, but as a recent bond rally shows signs of unwinding.
“We have held a cautious view on the outlook for equity markets for much of this year... however, the environment has shifted in recent weeks” said Patrik Schowitz, global multi-asset strategist at the fund manager in an emailed note.
“That change likely reflects several factors, which we think has some more room to run,” he added.
Schowitz cited renewed optimism on China and the United States reaching a deal to end their damaging trade dispute, recession risk in the U.S. dropping from an even chance to 20-30% and the possibility of earnings growth as the main factors. He did not specify how the upgrade would affect asset allocation nor offer target levels for equity indicies.
“Emerging market equities are now our most favoured region alongside U.S. large cap equities, which we believe can do relatively well under a range of scenarios,” he said. “Our least preferred markets are Australia and U.S. small cap equities.”
Asian shares ticked higher on Monday after Beijing surprised markets by trimming a key interest rate for the first time since 2015, stirring speculation that further stimulus was on the way for the world’s second-largest economy.
Reporting by Tom Westbrook; Editing by Shailesh Kuber