U.S. presidential
election offers little cause for alarm: JPMorgan AM's
Michele
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[November 02, 2016]
By Tomo Uetake
TOKYO
(Reuters) - The U.S. presidential election is unlikely to be a major
risk for financial markets as Congress is likely to put a brake on many
policies, whoever wins, the fixed income chief investment officer of
JPMorgan Asset Management said on Wednesday.
Bob Michele said the world's fifth largest asset manager increased
exposure to inflation-linked bonds (TIPS) and emerging market debt in
the last few weeks, expecting moderate growth and solid oil prices to
lift inflation and support emerging market currencies.
Global financial markets were roiled by signs the U.S. presidential
election race was tightening just days ahead of the Nov. 8 vote, with a
possible victory for Republican presidential candidate Donald Trump seen
as boosting uncertainty on U.S. foreign, economic and trade policies.
But Michele told Reuters in an interview that U.S. politics is not among
the major risk factors the firm looks at in coming months because the
House of Representatives is likely to remain Republican.
"This is very important because any law that the President would like to
pass has to go through the House for approval," he said.
"We are in an interesting position where, if (Hillary) Clinton gets
elected, the House - if it remains Republican - will likely push back a
lot of things she wants to do.
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"But if Trump gets elected and he tries to push through a lot of the
extremist, protectionist things he has talked about, I expect the House
will push that back."
Since both candidates are highlighting the need to rebuild U.S.
infrastructure, fiscal expansion is likely, whoever wins, Michele said.
In addition, U.S. and world growth look better than expected at the
start of 2016 and oil prices have recovered sharply from 12-year lows
hit early this year, which is likely to underpin prices in coming
months.
"There's a lot that will happen in a couple of weeks that will appear to
be very growth friendly and very inflation-oriented, including the
election," he added. "Many of the things we're doing now are to prepare
in advance."
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JP Morgan Asset Management Chief Investment Officer Bob Michele
speaks during an interview with Reuters at the company's Tokyo
office in Tokyo, Japan, November 2, 2016. REUTERS/Toru Hanai
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JPMorgan's asset management arm has added local emerging markets debt,
Michele added, citing high real yield, upsides to growth and
stabilization of currencies, thanks to recovering energy prices.
He named Brazil, India, Indonesia and Russia as attractive targets,
adding that it was a good time to take the currency exposure as well.
Michele, who manages the firm's $455-billion fixed income portfolios,
also said it was looking for opportunities to sell duration.
"When markets rally, we would use that as an opportunity to cut duration
of our portfolios because we think the market is going through a growth
and inflation scare."
JPMorgan Asset Management had $1.77 trillion in assets under management
by September 30.
(Reporting by Tomo Uetake; Editing by Clarence Fernandez)
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