GlobalMarketsStrategy20February2019F&LLibraryPositionindicatorsGlobalMarketsStrategyNikolaosPanigirtzoglouAC(44-20)7134-7815nikolaos.panigirtzoglou@jpmorgan.comBloombergJPMAFLOWJ.P.MorganSecuritiesplcMikaInkinen(44-20)77426565mika.j.inkinen@jpmorgan.comJ.P.MorganSecuritiesplcNishantPoddar,CFA(91-22)6157-3255nishant.poddar@jpmchase.comJ.P.MorganIndiaPrivateLimitedSeepage177foranalystcertificationandimportantdisclosures.www.jpmorganmarkets.comBelowareexcerptsofpastissuesofFlows&Liquidityonthetopicof:Positionindicators.Theexcerptscanbefoundinreversechronologicalorder,withthemostrecentupdatebelow.Theexcerptsarenotupdatedandareaccurateonlyasofthedateindicated.Generally,wedonotemailoutthisdocument,butmaintainitonJ.P.MorganMarketsasareferencetool.Whichassetsareoverbought?(extractfromFlows&Liquidity,15Feb19)Overallequitymarketsarestillfarfromoverboughtlevels.Acrossassetclasseswedofindhoweverpocketsofoverextension.Bunds,IronOre,USDandBRLappeartobemostvulnerabletopotentialpositionunwinding.EMequitieslookmorevulnerablethanEMbondsandHGcreditmorevulnerablethanHYcredit.AcrosssectorsHealthcarelooksmostvulnerablefollowedbyMaterials.Inreversaltolastyear,China'sshadowbankingsystemisexpandingsuggestingthatmorecreditisflowingtotheprivatesector.CSI300indexfutureshavefullyunwoundtheirpreviouslylargeshortbase.MarketpricingofUSrecessionriskreceding(unevenly).BothequityandbondindicesareupstronglyYTDsupportingourassetreflationthesis.Asweexplainedlastweek,asustaineddovishshiftbytheFediskeytothisassetreflationthesis.ThisisbecauseasustaineddovishshiftbytheFedwouldatleastpartlyreversetheyieldincreasesandequityPEmultiplecompressionof2018whichwastheresultoflastyear’ssimultaneoustighteninginboththeinterestrateandquantitativespace.RatemarketsaresignalingthatthedovishshiftbytheFedwillbesustained.MarketexpectationsabouttheFedpolicyratebytheendof2019haveprogressivelyshiftedawayfromratehikesandsincelastChristmasthesemarketexpectationshavebeensignalingahigherprobabilityofFedea...
