What's JPMorgan looking for in the second half of the year

The first half of 2018 is winding down with elevated volatility and growing worries about trade. That's in stark contrast to 2017 when volatility was at record lows and worries were brushed aside.

In the first half, more than half of major asset classes underperformed cash, according to JPMorgan.

So, they ask, was H1 more of a bad dream or a wake-up call?

There are risks both ways but they lean towards a return of synchronized global growth and a rebound in emerging market currencies, equities and bonds. In turn, it will also mean US dollar weakness.

"But both trades require catalysts from better non-US growth, clearer non-US politics and a less aggressive US trade policy," JPM analysts write in a note, saying it's not worth it to pre-position for the changes.

On the US dollar more broadly, here's how they characterize trading this year:

"The adjustment in the dollar to-date has merely seen the extreme pricing and positioning for the "synchronized global growth" scenario having been (partially) unwound. As such, the direction of the broad dollar in 2H18 primarily depends on whether US exceptionalism can persist for the coming quarters, or whether the world reverts to a phase of more synchronized growth.The former could see the dollar potentially appreciate by another 4-6%. In the latter, the dollar would shed a couple of percentage points in a return to a low-volatility grind with some respite in the process for beleaguered high-beta currencies."