A portfolio manager for JPMorgan’s $2.7 trillion asset management arm who’s topped 90% of

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Phil Camporeale, a JP Morgan portfolio manager, has topped 90% of peers in the past decade.
Markets have been choppy lately, but Camporeale is staying in stocks despite Omicron and inflation.
Here are the four sectors every investor should have exposure to in 2022.

Trying to beat the stock market’s return can be a fool’s errand . In fact, even professional fund managers only have a 12% chance of doing so — about the same likelihood as correctly guessing which way a two-sided coin will land three times in a row.

Phil Camporeale, a multi-asset portfolio manager at JPMorgan who runs the firm’s Global Allocation Fund (GAOSX), defies those odds. He’s outperformed the S&P 500 — and 90% of his peers — over the past 10 years, according to Morningstar.

His secret to success? An uncanny knack for knowing when to lean on stocks and when to fade them, which he described as “risk on, risk off, risk in between” in a recent interview with Insider.

The obvious follow-up question, then, is which way the standout manager is leaning ahead of 2022. Camporeale said he’s maintaining his risk-on approach by remaining overweight in US stocks — a bet that’s rewarded him handsomely in recent years.

“The biggest driver of our success, even though we compete in a Morningstar world category, has been our allocation to the US equity markets, specifically the S&P 500,” Camporeale said.

Wins, losses, and lessons from a top portfolio manager

Camporeale said his Global Allocation Fund has attained alpha, or excess return relative to the market, in every year since 2011 except for 2019. After his 16.3% return in that year lagged the 18.5% gain of Morningstar’s global index, Camporeale rebounded in style and placed in the top 9% of funds — a performance he’s especially proud of.

“2020 was an incredibly volatile year, as you know,” Camporeale said. “Being able to manage the risk in the first quarter but then really have the willingness, the ability, and the courage to put risk back on, really in late March and April, was important. And then keep the risk on during November, which was the election, a second wave of the virus without a vaccine, and then ultimately, the vaccine news came on November 9.”

This year has been another tough one for Camporeale’s fund, though it’s not over yet. With one month to go, JPMorgan’s Global Allocation Fund is up 6.6%, slightly behind the Morningstar global index’s 7.2% gain.

The fund got off to a rocky start to 2021 due to a misplaced bet on emerging-market stocks, Camporeale said. He believed that a rebound in global growth and continued weakness in the dollar would spark a long-awaited revival for EM stocks, the fund manager told Insider last December.

That thesis started to unwind a week into 2021, Camporeale said, because of a pair of catalysts that would send the US economy surging. Democrats’ victory in Georgia’s Senate runoffs was followed by a $1.9 trillion stimulus package, and growth also came from what Camporeale called an “incredibly efficient” vaccine rollout. Emerging market stocks couldn’t match the good news and spent the year lagging their US counterparts by the largest gap in 20 years.

“What that led to was a bout of US exceptionalism in the first and second quarters of this year,” Camporeale said. “And when you have US exceptionalism, usually what happens is the dollar strengthens and trades higher. That’s exactly what happened in the first quarter. That put particular pressure on EMs.”

Camporeale said he quickly pivoted from his misplaced call and shed his fund’s overweight position in EM stocks by the end of the first quarter. Though he’s currently slightly underweight EMs, Camporeale is glued to China’s regulatory environment and other signs of a possible revival in the space. Nailing the EM trade will be critical to outperformance in 2022, he said.

“We have to get that next trade right,” Camporeale said. “We can’t be left underweight that index.”

Where to invest in 2022

Stocks have been through hell and back in the past three years, yet the S&P 500 has returned at least 16% per year in that span.

Volatility

has spiked 61% since Thanksgiving as the Omicron variant threatens to slow global growth and it becomes more likely that the

Federal Reserve

will have to abruptly end its supportive monetary policy to keep inflation from running rampant.

Many investors are undoubtedly thinking about bailing on stocks. But that’s why they likely haven’t matched Camporeale’s performance in the past decade. Stay in stocks, he says.

The Omicron variant and higher inflation both warrant close monitoring, Camporeale said, but neither is worth overreacting to. It’s too early to tell how serious Omicron is, the fund manager said, noting that the S&P 500 still rose over the summer while the Delta variant spread like wildfire. And while Camporeale sees inflation running hot at least through mid-2022, he believes the Fed hasn’t made a policy error and is still “operating from a position of strength.”

Camporeale’s investing strategy for 2022 is as follows: Keep a well-diversified portfolio of stocks that’s heavy on US names as its economy stays hot, target stocks in economically sensitive value-oriented sectors, and manage inflation risk by owning some commodities.

Four sectors stand out, in Camporeale’s view: Financials, Energy, Industrials, and Technology. The first three will benefit from a roaring economy, and the latter is a must-have in any portfolio because it includes some of the world’s biggest and best companies. Tech names offer quality — meaning high and stable earnings — and protection in case the virus spreads further.