The ECB QE force should continue to reverberate into 2015. Not only is the

compression of euro area rate markets far from complete, but we also believe

that this yield compression has yet to be felt in other markets such as credit

and equities. We add to euro vs. US credit overweights by introducing a long

risk 35-100% Crossover vs. 35-100% CDX.HY Dec-19 and by opening an

overweight in euro area vs. US equities currency hedged.

EM currency weakness and lower commodity prices are likely to remain

headwinds for EM equities into next year. We abandon our ill-conceived

overweight in EM vs. DM equities and we instead prefer to seek value in the

equity space via the above overweight in euro vs. US equities.

Semiconductors within US equities and banks within euro area equities

continue to look attractive as long term trading themes.

We note that the threat to US credit markets from lower energy prices is

sectoral and largely priced in. Keep longs in US HY loans and CLOs. We

project a 5% return for HY loans next year. US CLO AAAs in the L+150bp

range are wider than ABS and Corporate spreads.

Latam breakevens continue to print money and see more upside as markets

underestimate the pass-through from weaker currencies to domestic inflation.

Take profit on Colombian breakevens but stay long Mexican and Brazilian

breakevens.

While we still see value in overweighting rates and underweighting the

currencies of Antipodeans, we take part profit by exiting our long in 10Y

ACGBs vs. 10Y USTs. Lower dairy vs. copper prices keep us long CLP vs.

NZD.

“Trade opportunities for long-term investors” is a quarterly publication we

first launched in June 2010. It summarizes long-term trade ideas across J.P.

Morgan Research, for investors who have 2-year investment horizons and are

less concerned about marking-to-market in the near term. The minimum

holding period for each trade is typically two quarters. Since we first

published trade opportunities for long-term investors four years ago, we have

made 146 different trade recommendations across all asset classes. Of these,

103 or 71% have been profitable.

trade opportunities for long term investor.pdf
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