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J.P.Morgan European Private Clients Reveal 2016 Financial Markets Expectations

  • Private equity is expected to be the best-performing asset class, while European equities is expected to take the lead over U.S. equities
  • Investors remain optimistic on U.S. interest rates, with a third expecting it to rise to between 1% and 1.5% in 2016
  • A third of investors also express caution on the outlook for the Chinese economy, and deflation is also named a key risk for the year ahead


May 18, 2016 (London, UK) – J.P. Morgan Private Bank today revealed market expectations and concerns European investors voiced in the firm’s latest Private Client Survey footnote 1. Client views explore the prospects for investment returns in 2016 and events they expect will impact financial markets. Find the Spring 2016 Investment Barometer here.

Equities expected to be the best-performing asset classes

This year, private equity emerged as the most favoured asset class (33%), followed closely by public equity markets (28%) – a contrast to 2015 where over half of investors believed equities would perform the best. Hedge funds also attracted some attention, with 16% of investors expecting them to provide good returns over the next year, while clients also thought commodities (14%) would fare well.

Additionally, over the past two years there has been a clear shift among investors when it comes to geographical allocation for equities, with the majority now favouring European equities over the U.S. This year, nearly half (47%) of investors see European equities outperforming other regions, while 35% still believe U.S. equities will lead the way this year.

Risks for financial markets in 2016

Following a shaky start to the year, a number of factors are worrying financial markets worldwide, including a surprise geopolitical event. In Europe, Brexit and Spain’s general election are the focus, while many are watching the U.S. the presidential race closely. Client fears surrounding the Chinese economy also remain, with 30% believing they could suffer a hard landing this year. Some regional variations can also be observed, with over half of German investors (52%) mostly concerned about global geopolitics, whilst Spanish investors (9.6%) fear this the least.

Emerging optimism on US interest rates

When asked where the U.S. Federal Reserve Federal Funds rate is expected to be by the end of 2016, a large proportion of investors (37%) believe rates will rise to between 1% and 1.5%. However, caution remains amongst some investors, with over half (59%) expecting the Federal Funds rate to remain under 1% for the year. Geographical opinion is consistent across Europe, except for Spain where there is an even divide between investors who think rates will remain under 1% and those who believe it will rise towards 1.5%.

Oil price remains a concern in 2016

Three-fifths (61%) of clients believe oil prices will remain close to where they currently reside between $30 and $40 per barrel for the rest of 2016, while a third (28%) are slightly more optimistic, expecting prices to rise to between $40 and $50. In 2015, a third of investors correctly predicted that oil prices would fall to between $30 and $45 a barrel. A portion of respondents (14%) expect oil prices to drop again and predict prices could slip to below $30, whilst only 6% think they will rise to above $50 by the end of the year.

“Despite uncertainty from global monetary policies, China’s slowdown and plunging commodity prices, our clients remain positive about the investment environment.”

Peter Gabriele, EMEA head of investments, J.P. Morgan Private Bank


About the Survey
1

More than 800 high-net-worth investors participated in a Private Client survey which polled participants on key European, U.S. and global investment issues, ranging from interest rates to oil prices. It was conducted as part of J.P. Morgan Private Bank’s latest Investment Insights series, held in seven of Europe’s leading cities earlier this year.

About J.P. Morgan Private Bank
J.P. Morgan is a global leader in financial services to corporations, governments, for-profit and not-for-profit institutions and wealthy individuals. Through its private banking franchise, the firm delivers customized wealth management advice and solutions to wealthy individuals and their families, leveraging its broad capabilities in investing, tax and estate planning, family office management, philanthropy, credit, fiduciary services and special advisory services to help its clients advance toward their own particular goals. For more than 150 years, the Private Bank’s comprehensive and integrated product offering, commitment to innovation and integrity, and focus on placing the interests of its clients first and foremost have made J.P. Morgan an advisor of choice to people of significant wealth around the world.

J.P. Morgan Private Bank is a marketing name for the private banking business conducted by JPMorgan Chase & Co. and its subsidiaries worldwide.