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JPMorgan’s Erdoes: Opportunity is everywhere in this turbulent market

There are plenty of opportunities in this turbulent market, says Mary Callahan Erdoes of JPMorgan.

Stocks are trading in a bear market this year as investors navigate inflation, Federal Reserve rate hikes and talk about a potential recession. On Wednesday, the S&P 500 recovered after hitting a new low for the year in the previous session.

“As the world is focused on all the black swan events, white swans will emerge,” Erdoes, CEO of JPMorgan Asset & Wealth Management, said Wednesday at CNBC’s Delivering Alpha investor summit in New York City. “Keeping your eye on those white swans and… staying invested in these markets is one of the most important things and one of the hardest things.”

A black swan is an unexpected event that results in panicked sales, while a white swan is a predictable crisis that can be dealt with.

Mary Callahan Erdoes, JP Morgan, on CNBC’s Delivering Alpha, September 28, 2022.

Scott Mlyn | CNBC

Staying invested means finding the right opportunities.

“There’s alpha everywhere,” Erdoes said. “It’s in stocks. It’s in bonds. It’s in currencies. It’s in real estate. It’s in private markets. It’s in public markets. It’s everywhere, because we’re in such a state of change. “

Alpha essentially refers to returns that exceed market performance.

In particular, Erdoes sees huge opportunities in China, although she admits that the country’s complex market may not be for everyone.

“Don’t fight investment in China,” she said. “It’s a country that will come out of Covid. It’s a country that’s going to get its 22% youth employment back to work. It’s an economy that will continue to invest in electric vehicles, semis, and so on.”

China is also moving towards its “Made in China 2025” goal of becoming a global technology leader, she added.

She also likes British banks and says they are perhaps ‘the most interesting you can invest in’. The country’s market and economy are in turmoil. On Wednesday, the Bank of England bought up British bonds in a bid to calm market chaos.

“Last week people said you don’t invest in one thing in the UK. That’s exactly when people like us, and people in the audience, think, ‘Let’s go check that out,'” she said.

For John Vaske, head of America at Temasek, the majority of his investment activity is in the private market. Right now, he’s expecting a few bearish quarters, so he’s pulling some cash out of favored names and planning to get back in at a lower price later. That includes companies like PayPal, Visa and Bill.com, he said.

Long-term, investors should be prepared for the high probability of a recession in 2023 or 2024, said Roger Ferguson, former CEO of TIAA and former vice chairman of the Federal Reserve.

“The chances of a recession are really very high,” he said.

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However, investing is a long-term activity. Therefore, investors should look for four or five key trends that will create investable opportunities for the next decade, as well as markets in need of disruption, he stressed.

Key trends include an aging population and increasing longevity, which Ferguson hopes will return. That means looking into healthcare, he said.

Another trend is defense spending, which is likely to rise, and some form of globalization. Investors will also have to get used to inflationary pressures, Ferguson noted.

“The Fed is going to work very hard to [inflation] down. I think even their own projection keeps them from getting there as fast as they’d like,” he said.

For those who may fear stocks because of that inflationary pressure or the possibility of a recession, Erdoes pointed out that history provides the answer to why you should keep investing. It’s usually within a 10-day cycle that you have your best returns, she said. Therefore, missing the best 10 days in any market environment will cut your returns in half, she added.

“When you think of people responsible for very large sums of money, everyone in this room, it’s irresponsible to be passive in what you’re doing now,” she said.

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