Big companies are prepping for a downturn…

JPMorgan CEO Jamie Dimon is considering selling off the company’s Manhattan headquarters and cutting or relocating employees to U.S. cities that boast cheaper costs and better tax benefits.

• It’s part of a plan to insulate the company from a looming economic downturn, Bloomberg reported Monday, citing anonymous sources.

What’s happening: “JPMorgan is tightening its belt more than in previous years amid a growing number of potential pitfalls for the economy,” Bloomberg’s Michelle Davis writes.

• “Cost cuts were the focus of a town-hall meeting with finance employees earlier this year that marked Jennifer Piepszak’s first as chief financial officer, a person with knowledge of the matter said.”

Why it matters: JPMorgan is the latest company, and one of the largest, reported to be making serious efforts to roll back spending as fears of a global recession or a large-scale downturn scare more U.S. companies into being prudent.

• More companies are using excess capital to reduce debt and add to cash reserves, rather than levering up and making risky bets as they have in the past.
• These moves could help cushion the economy from another damaging recession.

To wit: IAC, the $19 billion company that owns 80% of online dating behemoth Match Group and a slew of other online properties, has increased its cash balances to the highest level in 15 years. CFO Glenn Schiffman tells Axios the company has built up its cash position to $2.3 billion in anticipation of a downturn.

• “It’s incontrovertible that global growth is slowing,” Schiffman says, noting that there are a number of indicators that suggest “the economy may be feeling some friction and may be about to turn over.”
• Some of those factors, like slowing M&A activity globally and a tighter market for IPOs, venture capital and private equity, are providing some opportunities for the company when it comes to potential acquisitions, he adds.

The bottom line: The kind of profligate spending that was prominent ahead of the global financial crisis has been pared back significantly in recent months, with companies preparing for the economy to slow, Bernard Baumohl, chief global economist at the Economic Outlook Group, told Axios in August.

 
-But right now everything is awesome

The S&P 500 and the Nasdaq both closed at their highest levels ever on Monday, with the S&P hitting a new record for the first time since July.

Why it matters: The S&P broke out of the tight range it has been trading in for more than three months, as confidence appears to be flowing back through the market.

The big picture: U.S. Treasury yields also jumped, with the benchmark 10-year note rising to its highest since mid-September, signaling that bond investors also see hallmarks of an improving economic story and the possibility for inflation to rise.

• MSCI’s All Country World Index, which tracks stocks in 47 countries, hit its highest intraday level since February 2018.

What’s happening: The extension of Brexit to Jan. 31, a pause in the U.S.-China trade war, and near-certain expectations that the Fed will cut U.S. interest rates on Wednesday are all driving risk appetite.

Watch this space: This could be the first year ever during which stocks, bonds, gold and crude oil all rise at least 10%, according to LPL Financial.

 
-Hedge funds see 6th consecutive quarter of outflows

Hedge funds saw overall negative returns for the second month in a row in September and investors continued to pull their money out, data from research firm eVestment shows.

By the numbers: More than $12 billion was redeemed from the global hedge fund industry in September, bringing year-to-date flows to -$76.86 billion.

• Total third quarter outflows of $29.37 billion marked the sixth consecutive quarterly outflow for the industry.
• Total hedge fund industry assets under management were $3.27 trillion at the end of September, according to the report.

Between the lines: Multi-asset strategies have seen a wave of selling so far this year after a brutal 2018.

 
-Asset managers love EM, but hedge funds are moving out

Hedge funds are losing interest in emerging markets right as real-money asset managers like pension and institutional funds are starting to express major interest.

On one side: Hedge fund managers sold out of EM assets for the fifth consecutive month in September, eVestment’s data shows, with outflows increasing in size for two months in a row.

• That is a complete reversal of the strong pace of inflows to start the year as hedge funds bet 2018’s strong third and fourth quarters in EM would continue.

On the other side: Major institutional asset managers like Morgan Stanley and BlackRock came out strongly in favor of EM assets on Monday — EM debt in particular — with BlackRock reaffirming its positive stance and highlighting “a likely Fed rate cut this week and the potential for a stable U.S. dollar.”

• Morgan and BlackRock follow a long list of bullish EM fund managers, like Columbia Threadneedle’s Ed Al-Hussainy, who recently said they expect continued outperformance from EM debt in the fourth quarter.

Πηγή: axios.com