Investors should get more selective in H2: JPMorgan

Bloomberg

Investors should be more selective in the next six months as asset returns are likely to diverge because liquidity “cannot paper over specific weaknesses indefinitely,” according to JPMorgan Chase & Co.
An “indiscriminate approach” to a portfolio would largely have worked in April and May, when most financial assets rallied — a typical result at a turning point in the cycle, according to strategists led by John Normand in a June 19 note. They cited extreme positioning and liquidity dynamics, plus central-bank asset purchases, as contributing to increased correlations when economies enter recessions and then move to expansions.
“But typically these high correlations mean-revert to their long-term averages within a few months, in part because the pace of quantitative easing slows and in turn allows country, sector and company-specific factors to reassert themselves,” the strategists wrote. The second half of 2020 “should bring this sort of differentiation.”