The chief global strategist at JP Morgan Asset Management gave clients two key tips on how to invest in 2017 — and they are pretty simple.
In a brief client note, David Kelly said that these are two “brief financial resolutions” investors should consider this year:
1. Avoid home country bias — Kelly says that there is “the tendency of investors around the world to be over-invested in securities of their own country.”
2. Don’t focus on past performance — Kelly says that investors should not stuff their portfolios with assets that have previously had a stellar run, instead they should look at “current valuations and future prospects. These valuations and prospects suggest more reasons for caution around U.S. stocks and optimism around international stocks than investors have demonstrated over the last few years and particularly over the last few weeks.”
On the final trading day of 2016, the FTSE 100, Britain’s benchmark share index, hit a fresh closing high, marking the third time in three days that the index has broken all-time highs.
In the US, the S&P 500 was up over 10% across the year:
“Investors reflecting upon a politically tumultuous 2016 should actually be fairly pleased by the returns that global asset markets have delivered. Global equities rose around 10% (with small caps far exceeding that) and global bonds eked out a modest return,” said Kelly.
Here is the chart from JPMAM:
Stocks in particular have performed strongly over the last year, despite political upheaval from the Brexit vote, the election of a new US president, as well as a flurry of new elections happening across Europe.
Kelly points out that there has been a key driver for the markets despite the shift in the political landscape — commodities.
“A bounce in commodity prices has been a key driver for markets, helping emerging market equities and allowing credit markets to recover from the distressed levels seen a year ago,” said Kelly.
“The resilience of economic growth has also been important, pushing unemployment rates in most major countries below the levels at which they started 2016. Food for thought as we ponder an action-packed 2017.”