Summary: JPMorgan Chase issued a warning to their ultra high net worth clients about the importance of diversifying out of US dollar-denominated assets and the traditional 60/40 stock-bond split that most investors currently hold. They highlight the importance of gold and other commodities as a hedge against inflation and dollar depreciation.
In a new memo to investors from its private banking arm, JPMorgan analysts identify underlying risks associated with America's ballooning deficits. According to the bank, investors shouldn't expect any significant improvement in America's fiscal outlook any time soon.
To access J.P. Morgan Private Bank and receive memos like the one mentioned, clients typically need to meet certain minimum asset requirements. Generally, J.P. Morgan Private Bank serves individuals with at least $10 million in investable assets.
Inside the memo, it reads:
"The bottom line for investors is that we don’t expect meaningful improvement in the trajectory for the U.S. However, multi-asset portfolios should still be able to deliver for investors. That said, the risks are meaningful enough to consider adding non-U.S. dollar–denominated assets and 'real assets' such as infrastructure, gold, and commodities to traditional multi-asset portfolios. A focus on tax efficiency for U.S. taxpayers could also be prudent.”
JPMorgan states that the growing debt and deficits will limit the “fiscal flexibility” of the US, restricting the government’s ability to respond to future economic downturns.
With the status quo likely to continue, JPMorgan warns investors still relying on the traditional 60/40 portfolio to seriously reconsider. They recommend an approach that includes hedging against inflation and dollar depreciation.
"For investors, the message is clear: It is probably prudent to move beyond the traditional 60/40 portfolio. Including non-U.S. dollar assets and real assets such as infrastructure, gold, and commodities can provide a hedge against potential dollar depreciation and inflation. Tax efficiency is also key."
