J.P. Morgan explores how macro and quantitative signals can guide asset allocation, focusing on regime shifts, factor performance, and cross-asset positioning. The piece suggests traditional diversification may be less effective, with correlations rising toward 0.6 in stress periods. It also challenges whether momentum and value can consistently deliver excess returns in changing regimes.
Guide To The Markets – US 3Q 2021
J.P. Morgan Asset Management
Research
83 Pages
Key Takeaways
Rising Asset Correlations: Equity bond correlations approached 0.6 during stress periods, reducing diversification benefits and increasing portfolio drawdown risk across traditional 60/40 allocations.
Factor Performance Variability: Value underperformed growth by over 20% cumulatively in certain cycles, while momentum strategies showed sharper reversals during regime transitions.
Regime Shift Indicators: Macro signals such as inflation exceeding 2% and volatility spikes above 25 VIX historically aligned with weaker multi-asset returns and shifting factor leadership.
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