The wall of worry remains quite high according to JP Morgan. Risk premia remain abnormally high in today’s environment and could lay the foundation for further market gains according to their equity team:
“Sustained long-term uncertainty should keep risk premia well above the lows seen in past economic expansions. That is the easy conclusion. The issue is by how much. The composite risk premium on US assets (from its risk-return trade off line) remains near historic highs, despite the rally over the past year, and remains double its mean of the past half century (second chart). To us, uncertain as the aftermath of the financial crisis is, risk premia should not be double their historic mean.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.