JP Morgan Trading Insights: Crypto, AI, War, & Inflation!

AI or blockchain which has more Potential inflation or recession which Is more likely this year war or the next Pandemic which is more concerning all of These questions were recently asked of Over 700 institutional clients in an E-trading survey and in my video today I'm going to tell you exactly what they Are thinking so don't go anywhere Now the survey that I'll be covering Today was conducted by JP Morgan the International Investment Mega Bank They asked 835 of their institutional Clients who use their e-trading services A number of questions these clients come From over 60 locations and this is the Seventh year that this survey has been Conducted it covers several important Narratives and topics in the investing Space and I find it instructive to see What these institutional investors are Thinking and what risks they foresee for The year ahead and as I usually do with These reports I'll be giving some of my Own commentary and Analysis along the Way so without further Ado let's jump in The first question is about which Developments the Traders think are Likely to shape the markets in 2023 as You can see the biggest considerations This year are recession and inflation With geopolitical risk coming in third Market and economic dislocation comes in Fourth with government policy changes in

Fifth last on the list is ESG or climate Change which only one percent of Investors consider a concern and when it Comes to the pandemic nobody appears to Care anymore and can you blame them What's perhaps most interesting about This is how it compares to the same Survey results from last year back then Geopolitical conflict wasn't a concern At all with people being more focused on The pandemic and climate change oh what Can happen in a year okay let's break These down a bit more shall we it's Clear that the world is moving past the Pandemic if even countries like China Have decided to let it go you can be Sure it's not worrying most investors as Much as it did now of course China Opening up its economy will have Implications for all of us for one thing There's the impact that it could have on Inflation While there is a narrative that the Opening of Supply chains could ease the Impact of cost push inflation we also Have to consider that China opening up Will mean more demand for Global Commodities this could potentially mean More inflation for those products and Their derivatives around the world Then there's also the increased demand For travel from Chinese citizens who are Finally free to do so more demand for These Services means more inflation

There as well and I've talked about this In much greater detail in my video about China's reopening which I will leave in The description for you folks this is Part of the reason why the FED is still So cautious when it comes to rate policy They're still turning the screw on the Economy and have indicated that there Will be no pivot before the end of the Year that's why the second biggest risk Over here is recession the higher that Rates go the more damage is done to the Economy and the more likely we are to Have negative growth that said recent Employment data seems to be Contradicting that narrative somewhat Moving on down the risk Spectrum it's no Surprise that geopolitical conflict is a Much larger concern this year than last Year since the last survey an Increasingly brutal and entrenched war In Ukraine has cast a long Shadow over The world new Cold War tensions have Also been brewing between China and the US which are only likely to have Worsened on the back of that spy balloon Fiasco okay on to the next consideration And that's a dislocation between the Market and the economy quite simply There could be a situation in which Stock Bond or crypto prices are likely To not reflect what is going on in the Broader economy indeed that is what we Have seen so far in 2023 despite

Economic conditions that appear to be Worsening markets are still pricing in The most Rosy of outcomes that is a risk For investors trying to determine how to Allocate capital The next consideration is government Policy change which wasn't a real Concern last year my only assumption is That this is because of changes that Took place in the US around the control Of the House of Representatives more Market-friendly measures emanating from There could obviously mean more of a Boost for the markets of course there's Also a risk here in that it could lead To additional gridlock you need look no Further than the issues that now Surround the debt ceiling debate if the U.S was to default that would have Catastrophic implications for financial Markets something that I talked about in Much more detail in my video on it which Will again be in the description Now moving down the list it's no Surprise that ESG or climate change is No longer a real concern for these Investors even the biggest proponent of This investing narrative BlackRock has Quietly given up on its quest for social Investing according to the world Economic Forum not to say that these are Not legitimate concerns that we do need To address it's just that investors Don't see them as the most pressing

Issue at the moment okay so that was the First question but let's Circle back to That inflation question as the surveyors Go into a bit more detail over here more Specifically they asked those investors Who thought that inflation would have an Impact in 2022 where they see inflation Going in 2023 44 of those investors said That they see it going down this year Quite a sizable proportion it's not Uniform across geographies though that's Why the authors also presented this Chart which shows the views of those Investors based on their particular Region what this shows is that those Based in the UK and Europe have a much More hawkish view on inflation than Those based in the US this makes sense Not only because of recent inflation Data in these regions but also because They are suffering from their own unique Cost push pressures the most notable of Which is energy Moving on to the US a full 58 think that Inflation is likely to come down this Year this further illustrates why the FED feels so strongly about not easing Too quickly remember inflation Expectations are just as important as The actual data and these expectations Can drive inflation higher there have Been a number of large bond funds that Have come out and said that the Rejoicing around slowing inflation may

Be slightly premature indeed some of the Recent numbers coming out of the US have Pointed to a battle with inflation that Is still very much ongoing The numbers for November and December Were recently revised upwards on a Seasonally adjusted basis and the most Recent CPI print for January also came In hotter than expected 6.4 percent Versus the expected 6.2 percent the Point is that yes inflation is much less Of a concern this year than last but It's still important not to get too Carried away with the lower inflation Narrative we should not forget what Happened in the 1970s when the market Was too quick to assume that inflation Had eased it came back with a vengeance And required double-digit interest rates To bring it back down again Moving on though this next question Asked about the biggest daily trading Challenges that those surveyed were Likely to face in 2023 it's no surprise That the biggest of these is volatile Markets this wasn't even a concern last Year because investors thought it was Going to be up only I.E that the FED Would keep feeding the machine and that The predictability of the market would Help them trade it the biggest concern Last year was the availability of Liquidity and it's still the second most Important concern this year it actually

Ties into the volatility Point quite Well as the less liquidity there is the More volatile markets tend to become That's because it's harder to enter or Exit positions without materially Impacting on the price of the asset in Question okay on to the next section and That's all about trading technology The survey asked the respondents which Technologies they thought were likely to Have the biggest impacts on trading in 2023 it's no surprise then that Ai and Machine learning are top of the list AI Has taken 2023 by storm thanks to the Explosion in popularity of chat gbt more About that in the description Technologies like this have actually Been used in advanced trading algorithms For a number of years so one can only Assume that if open source technology Like that made available by openai is so Impressive the closed Source Tech of Quant funds must be even more Mind-blowing It's also interesting to see how much Ai And machine learning have pulled away From blockchain Tech in being Influential on trading to be honest this Does make sense Although we all know the benefits of Blockchain for open and permissionless Trading it can't do much in the way of Giving these institutions The Edge that They require in the market it's more of

A settlement mechanism than a trading Strategy this is also why I think that We saw the large fall in significance of Mobile apps for these institutions while This technology may make it easier to Trade on the go it's not as if these Investors are likely to beat the markets By pushing trades on their iPhones Anywho this next question over here is a Variant on the earlier ones in that it Asks the respondents about the concerns That they may have for Market structure The three options were access to Liquidity regulatory change and Market Fragmentation as it was last year access To liquidity is a major concern for These investors On to the last few questions now and These are particularly intriguing Especially for those of us in the crypto Space Over here the surveyors talk about Trends in the electronic trading space Or more specifically they ask the Recipients what percentage of their Trading volume will be through e-trading Channels for various different asset Classes at the top of the list we have Crypto or digital coins that is to say That the respondents predict that these Assets are likely to see the most growth In terms of institutional electronic Trading these include API multi-dealer Platforms and single dealer platforms

Now this is significant as it shows that Investors are increasingly moving their Crypto trading activities to these more Institutionalized Services we've seen This over the past year as there have Been several large companies on Wall Street that have started to open their E-trading Technologies up for crypto Related trading for example last year There was the news that blackrock's Aladdin platform would offer Bitcoin Trading You also had the likes of fidelity which Opened up ethereum trading to Institutional clients on their platform Now the benefit of this is that it Creates more efficient and liquid Markets which helps to reduce volatility And improve price discovery So if this trend continues then it's Likely to be a positive force for Institutional crypto adoption this year And the year after however the next Question is a bit less optimistic for Crypto it's this statistic that was Picked up by most of the crypto press Last week and that's that 72 percent of The investors in the survey have said That they have no plans to trade the Assets at any time that is a pretty Sizable majority of respondents only Eight percent said that they are trading It now and six percent said that they Plan to in the next year what this means

Is that if you believe the respondents We are unlikely to see that massive Rush Of institutional money flooding back Into the space this year of course Things could change should the market Shift considerably but that seems to be Less likely given the intense regulatory Scrutiny we're currently facing so Despite the fact that those eight Percent of investors who are trading Crypto intend to do so through Electronic Avenues they are unlikely to Be joined by many of their cohort in the Next year Okay well that is the report for now but I do have a few thoughts about what it All means Firstly on the macro side it seems as if Investors are more worried about the Impacts of fed policy on the economy Than on the inflation said policy is Designed to tame this isn't entirely Unreasonable when you consider that the Markets are driven more by monetary Policy than by Price pressures in the Economy indeed thanks to this monetary Policy and lower cost push pressures Inflation appears to be easing even Jay Pal himself has talked about that Illusory disinflation point a number of Times this is why these investors Especially those in the US are confident Enough to say that they see inflation Coming down in 2023 but they should be

Careful not to be too Rosy in their Projections Powell has said on many Occasions that a pivot is not on the Horizon and the recent CPI print is Likely to only reinforce his commitment To that it's also interesting to see That geopolitical conflict is such a Large concern for these investors it's Thrown out a new risk Dynamic that they Haven't had to include in their trading Considerations for a long time this Geopolitical uncertainty together with That macro uncertainty I just mentioned Is part of the reason why these Investors see volatility as one of the Biggest challenges they face in their Trading this year when it comes to Trading technology it's not surprising That AI has taken Center Stage it's not Only an Institutional phenomenon either Retail Traders are jumping on the AI Bandwagon and this can be seen with the Insane interest we've seen in some of Those AI related cryptos it's a bit Unfortunate that blockchain has fallen Out of favor but I am firmly of the view That blockchain Tech is one of the only Ways in which you can bring full Transparency to the trade settlement Space so give it time In terms of the questions on crypto E-trading and the crypto Outlook it's a Mixed bag while increased e-trading for Crypto is a win for liquidity in the

Markets it won't help that much unless There are more institutions that are Going to be trading these assets given That the vast majority don't have the Intention of doing so it's still going To remain a relatively Niche asset class For 2023. I guess we'll just have to Follow up on the e-trading survey next Year when the crypto bull market could Be back in swing he is hoping at any Rate And that's it for my video today folks If you enjoyed it you know what to do Hit that like button subscribe button And the bell icon too also if you're Looking for some of the best promos and Discounts in the crypto space then my Deals page is where you must go Exclusively for the viewers of this Channel yo All of that is linked to below and That's it for now my crypto friends I'll Catch up with all of you right around The bend