JPMorgan Strategists Boost Exposure to Commodities, Cut Bonds

(Bloomberg) -- Investors should boost their commodity positions, go further underweight bonds and maintain a pro-risk exposure to equities, according to strategists at JPMorgan Chase & Co.

A team including Marko Kolanovic, Nikolaos Panigirtzoglou and John Normand raised the commodities weighting of a JPMorgan model portfolio to 6% from 4% previously, in a note Thursday. It reduced exposure to government bonds to minus 13% from minus 12% and corporate bonds to 2% from 3%. Equity holdings were held steady at 10%.

“We increase our overweight in commodities, in particular energy, both as an inflation hedge and to position for a continued cyclical recovery,” the strategists wrote. The changes are “funded by a decreased overweight in credit where spreads are already testing our strategists’ year-end targets.”

The JPMorgan team expect strong growth in the global economy and see risks fading from issues like the trade war, Covid-19 pandemic and Brexit, according to the note. That’s broadly in line with the outlooks of much of their Wall Street peers. Panigirtzoglou last month cautioned about a “clear consensus” in markets leading to possible crowding in some trades.

“We continue to tilt the portfolio toward cyclical and value assets,” the strategists wrote. These “should continue to outperform as the vaccine rollout spurs a broader reopening of the economy and additional stimulus supports the recovery.”