Investing.com — The , the U.S. dollar and global bonds could face significant positioning risks heading into 2025, according to analysts at JPMorgan (NYSE:) in a note released Friday.
Using their Cross Asset Positioning Monitor, JPMorgan highlights potential vulnerabilities as markets adapt to changing liquidity and demand dynamics.
and the US dollar are flagged as having positioning risks.
The bank said it sees “high equity positions, slightly long duration positions, near neutral credit positions, high dollar long positions, underweight non-gold commodities , high positions in bitcoin, but more modest long positions in “.
“So, from a positioning perspective, the most vulnerable asset classes in 2025 are stocks, dollars and bitcoin, and the least vulnerable are commodities other than gold,” the bank said.
When it comes to bonds, the global balance between supply and demand is expected to deteriorate in 2025.
The bank forecasts a $0.9 trillion drop in global demand for bonds compared to 2024, as well as a relatively modest $100 billion reduction in net supply.
She explains that this imbalance could lead to upward pressure on yields, with the Global Aggregate Bond Index yield potentially increasing by 40 basis points.
Central banks will play a crucial role in this dynamic. JPMorgan notes that while the Federal Reserve is expected to end its balance sheet contraction in early 2024, it will continue to shift from mortgage-backed securities (MBS) to Treasuries.
They add that the European Central Bank (ECB) should completely stop reinvestments in its PEPP portfolio, and that the Bank of Japan (BoJ) should accelerate net bond sales in 2025.
JPMorgan notes that together, these actions contribute to modest improvements in demand for central bank bonds, but not enough to offset the broader decline in global demand.
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