J.P. Morgan


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6 WHAT SHOULD INVESTORS DO NOW? Absent fiscal stimulus or a rebound in inflation, we think it is likely that manufacturing growth remains tepid, yields remain low, and broad equity markets (hindered by the trade dispute) remain range-bound and choppy. For those already invested, we've advocated for (and enacted in portfolios that we manage) a more balanced approach relative to longer-term, strategic allocations. We have increased exposure to core bonds, concentrated equity exposure in the United States, and reduced exposure to high yield debt. It seems clear that it is late in the cycle, and accidents can happen when the Fed has tightened policy and growth has slowed down. That all argues for a prudent approach to risk. For investors looking for new opportunities, there are plenty. Right now, high-dividend stocks are trading at their largest valuation discount since 2000, and higher volatility can create opportunities to harvest yield using structured notes. Real estate could again offer a diversified source of income. Sectors that are growing may be worth paying more for, and we believe that the global digital buildout should continue to generate solid returns for investors. Finally, we can't dismiss the message we are receiving from markets: Risks seem skewed to the downside. As such, we still find value in core fixed income and gold, which could offer protection to portfolios if growth slows materially below our base case. Finally, a diversified, goals-based approach to investing is crucial while financial markets find their footing as global growth slides back into the pre-Trump trend.

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