J.P. Morgan’s DeMetropolis: Get defensive — even if recession isn’t coming soon

Market volatility is a constant these days, what with the increasing trade wars and the slowing economic growth around the world.

But Alma DeMetropolis, managing director and market manager for J.P. Morgan Private Bank in Summit, said that, while she and her team believe we are in the late stages of the economic cycle, they do not believe a recession is imminent.

“The 2-year/10-year U.S. yield curve inversion last month received a lot of attention, leading to the market volatility; however, the yield curve has been very flat for the better part of the last year,” DeMetropolis said. “We believe this is mainly driven by the demand for yield, given U.S. sovereign rates are still higher than the balance of the developed world.”

Late-cycle dynamics have come into play, she said, as economic data, especially internationally, has undershot expectations, inflation remains subdued and global central banks, including the U.S. Federal Reserve, are cutting interest rates.

“With all this in mind, we have been focused on making client portfolios more defensive as the cycle progresses,” DeMetropolis said. “A few examples include shifting exposures into higher-quality assets, identifying sectors that exhibit sustainable growth trends like technology and health care, and adding to core duration/buying longer maturity bonds within fixed income to lock in rates today.”