European households are holding too much wealth in cash and missing long-term investment opportunities, as investors navigate “one of the most uncertain macroeconomic environments in years”, according to George Gatch, CEO of JP Morgan Asset Management ( JPMAM).
Speaking in a fireside chat moderated by Lilia Peytavin, market strategist, Emea, JPMAM, Gatch said investors globally are grappling with persistent inflation worries, geopolitical conflicts and market volatility, prompting widespread reassessments of portfolio construction and asset allocation.
He said the uncertainty was nevertheless creating opportunities for active managers as clients revisit exposure across equities, fixed income and alternatives.
Gatch also pointed to structural shifts reshaping the asset management industry, including the rise of passive investing, the growth of ETFs and separately managed accounts, and increasing allocations to alternatives and private markets.
On Europe specifically, he said there was renewed investor focus on the region, supported by optimism that regulations could be simplified and policymakers could adopt a stronger commercial agenda. However, it still faces a major structural problem around household savings behaviour.
“In the US, 60% of household wealth is invested in securities and capital markets,” Gatch said. “Outside the US, half of household wealth is in cash deposits.”
According to Gatch, around 40%-45% of European household wealth remains in cash deposits, leaving savers exposed to inflation erosion while banks benefit from higher rates.
“The only ones who’ve benefited are the banks,” he said, adding that individual investors were “losing purchasing power over time because of inflation”.
He pointed to positive developments in Germany, including a new pension plan expected to be implemented at the beginning of next year, and said further regulatory steps could help strengthen retirement savings and capital markets participation across Europe.
On fixed income, Gatch said higher rates had made the asset class more attractive again after years of ultra-low yields.
Emerging market debt was yielding close to 8%, while diversified fixed income strategies could generate 6%-7% yields, offering investors a cushion against further rate volatility, he highlighted.
Gatch also argued active management would become more important in fixed income markets given inflation uncertainty and potential credit risks ahead. “You have 96% of fixed income ETF assets in passive strategies,” he said, calling the figure “mind-boggling” given the opportunities for managers to outperform in bond markets.
Private markets were another theme of the discussion, with Gatch describing the debate as no longer “public or private” but “public and private”.
“If you’re only fishing in public markets, you are missing big opportunities,” he said, adding that JPMorgan Asset Management was focusing on hybrid strategies integrating public and private market research capabilities, particularly in private credit.
However, Gatch cautioned investors against misunderstanding liquidity risks in private credit products. “The world has referred to these private credit strategies as semi-liquid. There’s no such thing,” he said. “These are illiquid assets and they should be treated that way.”
While he said there was currently no systemic credit issue in private credit markets, he warned the sector had yet to experience a full recessionary credit cycle.
Gatch also highlighted AI as a strategic priority, saying the technology would significantly expand research capabilities across the firm. “The machine does the digging and then the human does the decision making and applies judgment,” he said.
In the following session, Karen Ward, chief market strategist, Emea, shared that elevated equity markets remained rational despite geopolitical turmoil, as rising government and corporate spending continued to support growth and earnings.
Political instability was driving higher fiscal spending on defence, energy infrastructure and economic resilience, while companies increased AI-related capital expenditure. According to Ward: “The more chaotic the world becomes, the more governments are going to spend and the more companies are going to spend. That spending generates growth and that spending generates corporate earnings.”
Ward also warned European households remained overly reliant on cash savings despite inflation eroding purchasing power, citing around £1tn of UK savings and almost €2tn in Germany and France sitting largely in cash deposits.
Active management in fixed income would become increasingly important as governments balanced political pressures with bond market discipline, she said, while alternatives could provide portfolio protection during inflation shocks.
“When inflation is the problem, neither stocks nor bonds like it,” Ward said. “The best inflation protection is in alternatives.”
