US stocks had an extremely positive year last year, but 2014 has already begun to shows signs of unpredictability. Reactions are mixed, with some claiming a correction is imminent while others believe the market can still improve. A more recent concern is of contagion from emerging markets.
CIO at JP Morgan Private Bank Richard Madigan explained that the current market differs greatly from that in the late 1990s.
“We came in to this year expecting markets to be more volatile based on the fact that they, like the global recovery, are transitioning to a more normal environment,” he said. “We’re already seeing indications of this as volatility has already picked up across asset classes. Consensus opinion is currently pointing to emerging markets as the cause.”
According to Madigan, JP Morgan has “significantly reduced investments in foreign currencies, commodities, EM debt and EM equity markets” throughout 2013. In some cases, they “cut 10% to 15% of portfolio exposure,” he added.
Madigan’s outlook for the year is “built around the continuation of a slow-but-steady global recovery.”