According to JPMorgan Chase, “there’s still a logical approach to investing for the expected end of ‘easy money.'” This according to a recent article in Bloomberg.

The firm’s strategists have expressed concern around what they see as the lukewarm response by equities to strong earnings reports. While they believe that the February dip was in part a response to higher Treasury yields, the strategists argue that “this month, U.S. rates have risen only half as much as they did earlier this year, but stocks are still sidewinding despite bumper earnings.”

The article outlines the firm’s recommendations for late-cycle trades, including underweighting credit versus equities and going long gold and the yen as “Fed policy slows the economy and real rates collapse.”

But the JPMorgan team, led by their head of cross-asset fundamental strategy John Normand, warns against worrying too much about Treasury yields and advises instead to focus on the Fed funds rate which, “at near 0% remains accommodative. A nominal U.S. 10-year of 3 percent, which is only 0.8 percent in real terms, seems about 75 basis points away from challenging equities based on the earnings yield/real bond yield framework used by asset allocators.”

Noting that credit spreads tend to bottom long before equities peak, they conclude that “2019 could be a true late-cycle year when almost every asset underperforms cash. But that scenario is too medium-term to price in now such that equities never reclaim or surpass their February highs.”