(Bloomberg) — Safe-haven assets seen as traditional hedges aren’t panning out as they once did, according to JPMorgan Chase & Co.
Easy-money policies may actually be keeping investors in cash and away from other traditional buffers, strategists led by John Normand wrote in a note Friday. That’s because such policies create a zero-yield environment where cyclical assets might be too difficult to hedge, they said.
This kind of conservative mindset may not become popular enough to affect the direction of risky markets, but it could discourage investors from deploying their cash into other asset classes, the strategists said.
“Defensive assets are delivering their weakest performance and therefore worst hedge protection of any equity sell-off in at least a decade,” Normand said. “The wall of cash some hypothesize will inevitably flow into equity, credit and EM may remain very high indefinitely.”