JPMorgan Sees `Sweet Spot' for Credit as Recession Risk Is Low

(Bloomberg) -- Global trade tension, a strong dollar and limited risk of a U.S. recession makes this a “sweet spot” for credit, according to Thushka Maharaj, global multi-asset strategist at JPMorgan Asset Management.

Federal Reserve minutes released Wednesday underscore divergent views on inflation, she said on Bloomberg TV. While the comments were more upbeat on growth, the meeting pre-dated the latest episode in the tit-for-tat trade war between Washington and Beijing, which adds downside risk to both growth and inflation.

• There are clear winners and losers in emerging markets as a result of the trade war, she said. India isn’t directly in the firing line and also benefits from a supportive political backdrop.
  • Prime Minister Narendra Modi surged to a majority on his own in the nation’s general election.
• Dollar strength still hurts developing-nation securities, while weakness in the Chinese yuan is negative for some Asian assets.
• Supply chain disruptions will benefit some developing nations.
• Maharaj said JPMorgan is more neutral on emerging-market equities.
• Fixed-income markets are keeping in mind that recession risk over the next 12 to 24 months can’t be discounted, although the probability is low short term.

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