J.P. Morgan - Guide to the Markets_watermark
.pdf
vk.com/id446425943
US valuations and subsequent returns
Forward P/E ratios and subsequent 1-year returns
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%, annualised total return* |
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60 |
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Current level |
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40 |
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20 |
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Equities |
0 |
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-20 |
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-60 |
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14x |
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23x |
GTM – Europe | 51
Forward P/E ratios and subsequent 10-year returns
%, annualised total return* |
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30 |
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Current level |
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25 |
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20 |
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15 |
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10 |
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0 |
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-5 |
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-10 |
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-15 |
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-20 |
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8x |
11x |
14x |
17x |
20x |
23x |
Source: (All charts) IBES, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. *Dots represent monthly data points since 1988, which is earliest available. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.
51
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Equities
Equities and interest rates |
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GTM – Europe | 52 |
US Fed funds rate and equities/government bonds relative performance |
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% (LHS); relative total return index level, rebased to 100 in 1997 (RHS) |
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8 |
DM equities / DM government bonds |
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170 |
7 |
DM equities |
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outperforming DM |
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6 |
government bonds |
150 |
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5 |
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130 |
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4
110
3
90
2
70
1
US Fed funds rate
0 |
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50 |
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'97 |
'99 |
'01 |
'03 |
'05 |
'07 |
'09 |
'11 |
'13 |
'15 |
'17 |
'19 |
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Source: MSCI, Refinitiv Datastream, US Federal Reserve, J.P. Morgan Asset Management. Developed market (DM) equities: MSCI World and DM government bonds: BofAML/Merrill Lynch Global Government Index. Index levels are total return in US dollars. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 30 June 2019.
52
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Equities
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US bull and bear markets |
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GTM – Europe |
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S&P 500 declines from all-time highs, % |
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20% market |
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decline |
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-50 |
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-60 |
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3 |
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Recession |
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-70 |
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-100 |
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'28 |
'33 |
'38 |
'43 |
'48 |
'53 |
'58 |
'63 |
'68 |
'73 |
'78 |
'83 |
'88 |
'93 |
'98 |
'03 |
'08 |
'13 |
'18 |
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Characteristics of past bear and bull markets* |
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Bear markets |
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Macro |
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Bull markets |
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Return before peak |
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environment |
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Market corrections |
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Market |
Bear |
Duration |
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Bull |
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Bull |
Duration |
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12 |
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24 |
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peak |
return |
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Recession |
start date |
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return |
(months) |
months |
months |
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1 |
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Crash of 1929 – excessive leverage, irrational exuberance |
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Sep 1929 |
-86% |
33 |
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2 |
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1937 Fed Tightening – premature policy tightening |
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Mar 1937 |
-60% |
63 |
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Jun 1932 |
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324% |
58 |
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27% |
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119% |
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3 |
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Post WWII crash – post-war demobilisation, recession fears |
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May 1946 |
-30% |
37 |
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Apr 1942 |
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158% |
50 |
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27% |
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57% |
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4 |
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Flash crash of 1962 – flash crash, Cuban Missile Crisis |
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Dec 1961 |
-28% |
7 |
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Jun 1949 |
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436% |
152 |
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28% |
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23% |
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5 |
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Tech crash of 1970 – economic overheating, civil unrest |
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Nov 1968 |
-36% |
18 |
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Jun 1962 |
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107% |
78 |
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15% |
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35% |
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6 |
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Stagflation – OPEC oil embargo |
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Jan 1973 |
-48% |
21 |
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May 1970 |
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74% |
32 |
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16% |
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31% |
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7 |
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Volcker Tightening – campaign against inflation |
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Nov 1980 |
-27% |
21 |
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Oct 1974 |
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126% |
75 |
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32% |
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48% |
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8 |
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1987 crash – programme trading, overheating markets |
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Aug 1987 |
-34% |
3 |
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Aug 1982 |
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229% |
61 |
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36% |
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80% |
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9 |
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Tech bubble – extreme valuations, “dot com” boom/bust |
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Mar 2000 |
-49% |
31 |
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Dec 1987 |
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582% |
150 |
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19% |
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39% |
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10 |
Global Financial Crisis – leverage/housing, Lehman collapse |
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Oct 2007 |
-57% |
17 |
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Oct 2002 |
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101% |
61 |
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16% |
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31% |
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Current cycle |
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– |
– |
– |
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Mar 2009 |
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335% |
123 |
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MEDIAN |
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– |
- 42% |
21 |
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158% |
61 |
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27% |
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39% |
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Source: Bloomberg, NBER, Robert Shiller, Standard & Poor’s, J.P. Morgan Asset Management. *A bear market represents a 20% or more decline from the previous market high using a monthly frequency; a bull market represents a 20% increase from a market trough. Periods of “recession” are defined using US National Bureau of Economic Research (NBER) business cycle dates. Chart and table show price return. Median values are calculated excluding data from current cycle.
Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.
53
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Equity income |
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GTM – Europe | 54 |
S&P 500 total return index: Dividends and capital appreciation |
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Capital appreciation |
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%, average annualised returns |
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Dividends |
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20 |
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13,9% |
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13,6% |
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12,6% |
15,3% |
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10 |
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3,0% |
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4,4% |
1,6% |
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9,4% |
5,9% |
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5,4% |
6,0% |
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1,8% |
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4,7% |
5,1% |
3,3% |
4,2% |
4,4% |
2,5% |
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4,0% |
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0 |
-5,3% |
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-2,7% |
2,1% |
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Equities |
-10 |
1930s |
1940s |
1950s |
1960s |
1970s |
1980s |
1990s |
2000s |
2010-2018 |
1926-2018 |
1926-1929 |
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Sources of income |
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% yield |
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8 |
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Europe average inflation: 1,9% |
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5,8 |
5,9 |
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6 |
(12 months to May 2019) |
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4,2 |
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3,7 |
3,9 |
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4 |
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2,8 |
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2 |
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0,5 |
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0,0 |
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0 |
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-0,3 |
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-2 |
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DM high yield |
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German |
Cash |
Euro IG |
EM |
MSCI |
Global |
Global REITs |
EM debt |
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Bunds |
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equity |
Europe |
convertibles |
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Source: (Top) Ibbotson, Refinitiv Datastream, Standard & Poor’s, J.P. Morgan Asset Management. (Bottom) Barclays, BofA/Merrill Lynch, FTSE, Refinitiv Datastream, J.P. Morgan Asset Management. Euro IG: Bloomberg Barclays Euro Aggregate Credit - Corporate; Global convertibles: Bloomberg Barclays Global Convertibles; EM equity: MSCI EM; Global REITs: FTSE NAREIT Index; DM high yield: BofA/Merrill Lynch Developed Markets High Yield Constrained; EM debt: J.P. Morgan EMBI Global. Yields for the bond indices are yield to maturity and dividend yields for the equity indices. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.
54
vk.com/id446425943
US sector returns and valuations
S&P 500 Index
Materials Industrials Financials Energy
S&P 500 weight Russell Growth weight
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Russell Value weight |
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2Q 2019 |
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Equities |
YTD |
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Since market peak** |
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Since market low*** |
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Beta to S&P 500 |
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Forward P/E ratio |
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Average since 1996 |
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Trailing P/E ratio |
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Average since 1996 |
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Dividend yield |
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Average since 1996 |
2,8% |
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9,4% |
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13,1% |
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5,0% |
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1,9% |
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11,5% |
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4,4% |
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0,7% |
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4,0% |
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8,0% |
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22,5% |
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9,0% |
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6,3 |
3,6 |
8,0 |
-2,8 |
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17,3 |
21,4 |
17,2 |
13,1 |
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76,7 |
124,9 |
21,1 |
7,7 |
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321,0 |
518,2 |
560,9 |
97,3 |
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1,28 |
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1,20 |
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1,19 |
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1,18 |
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17,3x |
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16,0x |
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11,9x |
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16,1x |
14,0x |
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16,2x |
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12,8x |
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17,5x |
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17,0x |
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17,3x |
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12,6x |
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17,1x |
16,6x |
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17,9x |
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15,3x |
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21,1x |
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2,2% |
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2,0% |
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2,3% |
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3,7% |
2,6% |
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2,1% |
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2,3% |
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2,4% |
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GTM – Europe | 55
Cons. |
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Tech |
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Comm. |
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Real |
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Health |
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Cons. |
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Utilities |
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S&P 500 |
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Discr. |
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Services* |
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Estate |
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Care |
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Staples |
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10,2% |
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21,5% |
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10,2% |
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3,1% |
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14,2% |
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7,3% |
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3,3% |
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100% |
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Weights |
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15,2% |
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33,5% |
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12,0% |
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2,4% |
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12,6% |
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5,7% |
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0,0% |
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100% |
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5,3% |
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9,7% |
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7,1% |
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5,0% |
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15,2% |
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7,8% |
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6,4% |
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100% |
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|
|
5,3 |
6,1 |
4,5 |
2,5 |
1,4 |
3,7 |
3,5 |
4,3 |
|
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|
|||||||
|
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|||||||||||||||
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|
|
|
|
280,6 |
279,0 |
60,9 |
97,1 |
219,5 |
188,0 |
128,0 |
141,4 |
|
Return |
|
|||||||
21,8 |
27,1 |
19,1 |
20,4 |
8,1 |
16,2 |
14,7 |
18,5 |
|
|
|
|||||||
781,0 |
694,2 |
207,3 |
630,8 |
415,1 |
303,9 |
299,1 |
439,5 |
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|||||||
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|
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|
|
|
|
1,11 |
|
1,11 |
|
0.94* |
|
0,84 |
|
0,79 |
|
0,60 |
|
0,30 |
|
1,00 |
|
β |
|
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|
|
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|
|
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|
|
|
21,2x |
|
19,2x |
|
17,7x |
|
19,3x |
|
15,4x |
|
19,2x |
|
18,8x |
|
16,9x |
|
|
|
17,9x |
|
20,3x |
|
18.2x* |
|
15,4x |
|
17,6x |
|
17,3x |
|
14,1x |
|
16,0x |
|
P/E |
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|
|
||
22,3x |
|
19,4x |
|
18,4x |
|
19,4x |
|
16,5x |
|
19,3x |
|
19,2x |
|
17,4x |
|
||
|
|
|
|
|
|
|
|
|
|
||||||||
20,3x |
|
23,7x |
|
19.9x* |
|
16,4x |
|
19,5x |
|
18,7x |
|
14,7x |
|
17,8x |
|
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|
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|
|
|
|
|
|
|
|
1,4% |
|
1,5% |
|
1,4% |
|
3,3% |
|
1,8% |
|
3,0% |
|
3,4% |
|
2,0% |
|
Div |
|
1,5% |
|
0,9% |
|
1.6%* |
|
4,4% |
|
1,8% |
|
2,6% |
|
4,1% |
|
2,0% |
|
|
|
|
|
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||||||||
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|
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Source: FactSet, Russell Investment Group, Standard & Poor’s, J.P. Morgan Asset Management. All calculations are cumulative total return in USD, not annualised, |
|
including dividends for the stated period. *Communication Services (formerly Telecom) averages are based on five years of backtested data by JPMAM. **“Since |
|
market peak” represents period 9 October 2007 to end of last quarter. ***“Since market low” represents period 9 March 2009 to end of last quarter. Forward P/E ratio |
|
is a bottom-up calculation based on the most recent S&P 500 Index price, divided by consensus estimates for earnings in the next 12 months (NTM), and is provided |
|
by FactSet Market Aggregates. Trailing P/E ratios are bottom-up values defined as month-end price divided by the last 12 months of available reported earnings from |
|
brokers. Dividend yield is calculated as the next 12-month consensus dividend divided by most recent price. Averages are since 1996 due to data availability. Past |
55 |
performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019. |
|
vk.com/id446425943
Equities
|
|
Europe earnings |
|
|
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|
GTM – Europe | |
56 |
||||||||||
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||||||||||||||||||
MSCI Europe earnings and performance |
|
|
|
|
|
MSCI Europe earnings per share growth |
|
|
|
|
|
||||||||||||||||||||||
Next 12 months’ earnings per share estimates (LHS); index level (RHS) |
|
% change year on year |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
130 |
|
|
MSCI Europe EPS |
|
|
|
|
MSCI Europe |
|
1.800 |
|
40 |
|
|
|
|
|
|
|
Start of year EPS growth |
|
|
|
||||||||||
|
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||||||||||||||||
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|||||||||||||||||
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index level |
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expectations |
|
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||||
|
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32 |
|
|
|
|
|
|
|
Delivered EPS growth |
|
|
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|||||||
|
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|
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|
|
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|
||||||
120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.600 |
|
|
|
|
|
|
|
|
Current EPS growth expectations |
|||||||||
|
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|||||||||||
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||
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|
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|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.400 |
|
16 |
|
|
|
|
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|
|
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9% |
|
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|
|
|
|
8 |
|
|
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|
|
|
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|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.200 |
|
|
|
|
|
|
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|
|
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|
|
|
|
4% |
|
|
90 |
|
|
|
|
|
|
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|
|
1.000 |
|
0 |
|
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|||
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-8 |
|
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||
|
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|
|
-16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800 |
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
-24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600 |
|
-32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|||
'07 |
'08 |
'09 |
'10 |
'11 |
'12 |
'13 |
'14 |
'15 |
'16 |
'17 |
'18 |
'19 |
|
|
'07 |
'08 |
'09 |
'10 |
'11 |
'12 |
'13 |
'14 |
'15 |
'16 |
'17 |
'18 |
'19 |
'20 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source: (All charts) IBES, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. EPS is earnings per share. Expected earnings growth and delivered earnings growth are calculated using IBES consensus estimates for next 12 months’ EPS and last 12 months’ EPS, respectively. Year on year growth rates are calculated using year-end data. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.
56
vk.com/id446425943
Europe equity macro correlations |
GTM – Europe | 57 |
MSCI Europe and composite PMI |
MSCI Europe and consumer confidence |
|
Index level |
|
|
|
|
|
|
Recession |
|
Index level |
|
|
|
|
Europe consumer confidence |
|
||||||
|
1.800 |
MSCI Europe |
|
|
|
65 |
1.800 |
|
|
|
|
0 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
1.600 |
|
|
|
|
|
|
|
|
|
60 |
1.600 |
|
|
|
|
|
|
|
|
|
-5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
1.400 |
|
|
|
|
|
|
|
|
|
|
1.400 |
|
|
|
|
|
|
|
|
|
|
Equities |
|
|
|
|
|
|
|
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
-10 |
1.200 |
|
|
|
|
|
|
|
|
|
|
1.200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
-15 |
|
1.000 |
|
|
|
|
|
|
|
|
|
|
1.000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
-20 |
|
800 |
|
|
|
|
|
|
|
|
|
|
800 |
|
|
|
|
|
|
|
|
|
|
|
600 |
|
|
|
|
|
|
|
Europe |
40 |
600 |
|
|
|
|
|
|
|
|
|
-25 |
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
composite |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PMI |
|
|
|
|
|
|
|
|
|
|
|
|
|
400 |
|
|
|
|
|
|
|
|
|
35 |
400 |
|
|
|
|
|
|
|
|
|
-30 |
|
'99 |
'01 |
'03 |
'05 |
'07 |
'09 |
'11 |
'13 |
'15 |
'17 |
'19 |
'99 |
'01 |
'03 |
'05 |
'07 |
'09 |
'11 |
'13 |
'15 |
'17 |
'19 |
Source: (Left) Markit, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. The composite Purchasing Managers’ Index (PMI) assesses the economic health of the manufacturing and services sectors by surveying output and employment intentions. Dashed line at 50 indicates that economic activity is neither expanding nor contracting, above 50 indicates expansion. (Right) European Commission, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Light grey columns indicate recession. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.
57
vk.com/id446425943
Europe equity market and currency |
GTM – Europe | 58 |
MSCI Europe vs. the euro
|
Index level (LHS); US dollars per euro (RHS) |
|
|
|
|
|
|
|
|
||
|
1.800 |
|
|
|
|
|
|
|
|
|
1,7 |
|
|
MSCI Europe |
|
|
|
|
|
|
|
|
|
|
1.600 |
|
|
|
|
|
|
|
|
|
1,6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,5 |
|
1.400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,4 |
Equities |
1.200 |
|
|
|
|
|
|
|
|
|
EURUSD |
|
|
|
|
|
|
|
|
|
|
1,3 |
|
1.000 |
|
|
|
|
|
|
|
|
|
1,2 |
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,1 |
|
800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,0 |
|
600 |
|
|
|
|
|
|
|
|
Euro depreciating |
|
|
|
|
|
|
|
|
|
|
|
|
0,9 |
|
400 |
|
|
|
|
|
|
|
|
|
0,8 |
|
'99 |
'01 |
'03 |
'05 |
'07 |
'09 |
'11 |
'13 |
'15 |
'17 |
'19 |
Source: MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 30 June 2019.
58
vk.com/id446425943
Equities
|
|
Europe equity valuations |
|
|
|
|
|
|
|
GTM – Europe | 59 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
MSCI Europe forward P/E ratio |
|
|
|
|
|
|
|
|
|
|
|
|
||||
x, multiple |
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
||
27 |
|
|
|
|
|
|
|
|
Valuation measure |
|
since |
Latest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
Cyclically-adjusted P/E ratio |
19,4x |
18,6x |
|
|
|
||
|
|
|
|
|
|
|
|
P/B ratio |
|
|
2,1x |
1,8x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
Average: 14,3x |
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 June 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,9x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
'90 |
'92 |
'94 |
'96 |
'98 |
'00 |
'02 |
'04 |
'06 |
'08 |
'10 |
'12 |
'14 |
'16 |
'18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source: FactSet, IBES, MSCI, Refinitiv Datastream, J.P. Morgan Asset Management. P/E ratio calculated using IBES earnings estimates for next 12 months. Cyclically-adjusted P/E is price-to-earnings ratio adjusted using trailing 10-year average inflation-adjusted earnings. P/B ratio is trailing price-to-book ratio. Past performance is not a reliable indicator of current and future results. Guide to the Markets - Europe. Data as of 30 June 2019.
59
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Europe large, mid and small capitalisation equities |
GTM – Europe | 60 |
MSCI Europe large, mid and small cap performance
|
Index level, rebased to 100 in 2000 |
|
|
|
|
|
|
|
|
|
|
350 |
|
|
|
|
|
|
|
|
Small cap |
|
|
|
|
|
|
|
|
|
|
|
|
300 |
|
|
|
|
|
|
|
|
|
|
250 |
|
|
|
|
|
|
|
|
|
Equities |
200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mid cap |
|
150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
|
Large cap |
|
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
'00 |
'02 |
'04 |
'06 |
'08 |
'10 |
'12 |
'14 |
'16 |
'18 |
Source: MSCI, Refinitiv Datastream, J.P. Morgan Asset Managament. Past performance is not a reliable indicator of current and future results.
Guide to the Markets - Europe. Data as of 30 June 2019.
60