J.P. Morgan Asset Allocation: Bullish on "Tech + Cyclical," Suggests Adding Healthcare Sector to Reduce Risk

BlockBeats News, August 4th, JPMorgan's latest report indicates a continued bullish view on the "Tech + Cyclical" combination in stock allocation. It also recommends adding healthcare as a third investment theme to reduce the overall portfolio's correlation with macro factors.

The report points out that there is currently an opportunity for an oversold rebound in the Technology sector. The forward P/E ratio of the seven tech giants (excluding semiconductor companies) in the US is now lower than two standard deviations below the mean since 2018. Reverting to the historical average could bring about a 56% upside. JPMorgan believes that the market's concerns about AI investment returns are excessive, with ultra-large-scale cloud computing companies experiencing a 150% backlog order growth, surpassing the 80% growth in capital expenditure. They are optimistic about the mean reversion opportunity in AI-related assets, particularly focusing on Asia-Pacific AI targets such as South Korea.

Regarding the Cyclical sector, JPMorgan suggests shifting from Financials and Consumer to Industrial stocks, stating that industrial companies will benefit from global economic improvement, earnings recovery, and a valuation reassessment driven by the AI theme.

Furthermore, the report recommends allocating to the Healthcare sector as a defensive asset due to its low correlation with macro cycles, helping to reduce portfolio volatility.

On the Emerging Markets front, JPMorgan tactically favors Chinese H shares, believing that H shares are poised to benefit from AI infrastructure development and commercialization trends but have lagged behind South Korea, Taiwan, and A shares. At the same time, they advise investors to prudently take profits on some AI supply chain targets that have seen excessive gains and crowded positions.

The report also suggests keeping an eye on Asian refining companies, noting that geopolitical uncertainties are driving Asian refining margins to historical highs.