JPMorgan’s Kelly Likens Investing Slog to Marathon Run at Age 53

(Bloomberg) -- Investing through 2017 will be like running a marathon at an older age, with the challenges increasing as economic growth decelerates, according to the chief global strategist at JPMorgan Chase & Co.'s asset management unit, David Kelly.

“We still have to run this race, and it's a tougher race,” said Kelly, 53, who will be entering his first New York City Marathon on Sunday with his son. He spoke at a media event in which he detailed capital-market assumptions for the upcoming year. “In this marathon, it's a long, slow slog.”

JPMorgan is seeking to highlight the benefits of active management amid slowing growth and near-zero bond yields, even as many investors have been shifting to lower-cost, passive strategies such as exchange-traded funds. GDP is expected to expand 1.5 percent this year and 2.1 percent in 2017, according to projections from analysts surveyed by Bloomberg. That compares with an average of more than 3 percent annually in the 1990s.

“If I had done this marathon, my first marathon, 20 years ago, I would have expected to run it faster,” Kelly said. “Just because of my age, I'm not going to be able to run as fast. And if you look at the economic assumptions in terms of labor force growth and productivity growth, this just is not the same economy as it was 30 years ago globally. It's got less potential.”

Kelly likened an eight-year bull market in equities to “going out too fast” in a marathon and losing speed later on. Institutions should be reducing their return targets to less than 5.5 percent, said Jed Laskowitz, co-head of global investment management solutions at the bank.

Two years ago, “6 percent was the new 8 percent. We think that's coming down to closer to 5-and-a-quarter,” Laskowitz said.“Expected returns are coming down.”

--With assistance from Scott Lanman To contact the reporter on this story: Sonali Basak in New York at sbasak7@bloomberg.net. To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net, Peter Eichenbaum