JP Morgan's Olivia Mayell

We may be in a late-cycle market environment, which warrants a cautious approach to investing, but JP Morgan’s Olivia Mayell believes there are still reasons to be positive and we shouldn’t be “too gloomy” about future market returns.

Speaking at a JP Morgan media briefing this morning, the managing director of multi-asset solutions in London said that while we have to acknowledge being “very squarely” in the late cycle, that doesn’t necessarily mean we’re on the cusp of recession.

“I think something investors often get confused with is that they hear ‘late cycle’ and they think ‘recession’,” Mayell said. “But it doesn’t mean that we think [a recession] is going to be imminent.”

Mayell explains that any possible recession is “some way ahead of us”, and we should measure our sense of doom.

“If we look at the basic temperature of the markets, we find a lot to feel positive about,” Mayell said. “Inflation is very benign. We don’t see that the things that scare us into recession are necessarily there.”

Mayell points to employment data as one of the positive indicators and notes that it’s still “driving consumption in the developed world, particularly in the US”.

“What’s interesting when we look across the late cycle is that, broadly, most of these things are sort of encouraging, [and] can continue to be supportive for markets generally,” she said.

Mayell acknowledges that markets are pulling back and investors should be starting to exercise more caution. “It isn’t an easy environment,” she said.

Mayell estimates that levels of return should drop to “about 5 per cent” over the next 10-15 years.

“That should make us feel a little gloomy,” she says. “It should make us feel like it’s harder to invest in a diversified portfolio, and that expectations need to be managed. But I don’t want you to feel so gloomy that you think, ‘Well that’s it, nothing good’s ever going to happen again’, because there are clearly things that we can do to mitigate that risk.”

Active management, she says, will be key to “riding the dips more effectively”.

“Don’t get lost in owning everything,” she advises. “Take very focused positions and be selective in what you buy. But don’t run for the hills and put all your money in a box. Just be a little more cautious.”

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Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.