Portfolio Pulse: Future Transition Multi-Asset Fund
Eyes on the future with an innovative asset allocation strategy
Feb 2023 (3-minute read)
Key takeaways:
Income investing presents a middle ground of opportunities that can help investors capture broader market upside while providing buffer through cash flows from income generating assets to help ride through volatile times.
Bonds have become more attractive given the meaningful pick up in yields while income generated from dividend equities, real estate investment trusts (REITs) and covered calls can help diversify income sources.
The sweet spot between caution and optimism
Investment markets are off to a good start. China’s reopening, moderating US inflation and firming expectations of smaller interest rate hikes by the Federal Reserve have seemingly prompted a turn in market sentiment.
Among investors, some may be considering the prospect of dialling up risk in portfolios to make the most of the recovering market sentiment. Yet there are risks ahead. Aggressive monetary policy tightening has increased the risks of a downturn in the US, while China may be facing some challenges in the transition towards living with COVID-19. Elevated economic uncertainty may keep markets volatile for some time.
Against these considerations, investors could be searching for ways to harness opportunities in a recovering market without piling on the risks. Income investing can be one option. It presents a middle ground of opportunities that can help investors capture broader market upside while providing buffer through cash flows from income generating assets such as bonds and dividend-paying stocks to help ride through volatile times.
Dividend-paying stocks: more than just a source of income
Dividend-paying stocks have historically exhibited lower volatility versus the broader index and growth stocks. As illustrated below, the annualised volatility of the MSCI ACWI High Dividend Yield Index has consistently stayed lower than the MSCI ACWI Growth Index across different time periods.
This low volatility characteristic, coupled with meaningfully higher dividend yields relative to its growth peers, have contributed to the outperformance of dividend paying equities over the last two years. Given the uncertain economic backdrop, dividend paying equities could still play an important role for portfolios.
High dividend stocks tend to exhibit lower volatility relative to its growth peer. It has also outperformed the broader index over the last two years.
Fixed income is fashionable again
Bonds are generally the foundation of any income portfolio. After a year of significant repricing in bond markets, as illustrated below, yields across various fixed income sectors have risen to decade highs due to monetary policy tightening by major central banks. This illustrates the role of fixed income in portfolios as higher yields may bring in opportunities for higher investment income and may potentially serve as a hedge to help manage recession risks.
Stay diversified, stay flexible, stay active
Amid a fluid market environment, it is important to engage risk mindfully and prudently. Income investing can help tap investment opportunities while managing volatility via potentially steady cash flows from a diversified portfolio of income generating assets. It presents a more durable, long-term approach to revisiting market opportunities as silver linings emerge after a difficult 2022.
The flexibility to capture opportunities within and across asset classes, sectors and geographies as well as dynamically adjust portfolio allocation is essential to navigate the cross currents in an uncertain market environment. Active duration management in response to a changing interest rate environment is also critical to steer fixed income portfolios during a period of high inflation and slowing growth.
Eyes on the future with an innovative asset allocation strategy
Capturing dividend opportunities across Asia
With yields hovering close to decade highs across many fixed income sectors, investors are presented with a “menu of options”. Still, selectivity matters as recession risks loom.
A pulse check on our Asian bond portfolio
After a difficult year for bonds, we explain why fixed income could once again prove to be a useful diversifier for portfolios.
As the Fed’s rate hike cycle concludes, bonds can present an important source of income and diversification for portfolios.
We share our views on Asian bonds and how we position in 2H 2023.
We explain why investors should pay greater attention to quality bonds.
We share insights on the Japanese equity strategy while riding on cyclical and structural tailwinds.
ASEAN, China and the broader Asia ex-Japan region present ample opportunities for long-term growth.
Here is a chart indicating IG bond opportunities as US Treasury yields stay elevated.
A quick look at how the Fund is positioned as recession risks loom and financial conditions tighten.
A quick take on our strategy in investing Asian income assets amid global economic slowdown and China’s reopening.
We highlight the impact of China’s reopening on Asia equities and the key secular trends driving long-term growth in the region.
Flexibility is at the heart of our approach to fixed income markets.
We share the key themes driving equities as China reopens.
We share the key themes that are driving equity investment opportunities in ASEAN.
Rising government bond yields have presented more room to manage the impact of rate hikes. How big is this leeway?
We share our views on the fixed income opportunities in the current tough times.
Income investing remains relevant in the current market environment, as volatility is poised to remain elevated.
We believe that quality and yield opportunities can still be found in bonds.
We share a 2H 2022 market outlook on the key themes in China equity investing.
We discuss five megatrends related to climate change and the investment implications.
How technology is advancing the process of diagnosis – listening, observing, enquiring and examining – while presenting market opportunities.
Learn about how sustainable infrastructure helps drive the development of metaverse and electric vehicles.
We share a perspective on sustainable and traditional infrastructure.
Digital education helps enhance the learning experience, driving new growth opportunities.
We discuss how urbanisation is driving opportunities in the infrastructure space.
Harnessing innovative digital and communications technologies for new economic growth opportunities.
We share our perspectives on positioning for income as rates rise.
Increasing demand for healthcare services globally is presenting growth opportunities.
Going beyond the traditional fixed income sectors to tap into the potential of securitisation.
Fixed income isn’t just government or corporate bonds, it also includes non-traditional debt securities.
The securitisation market has regained much ground in the past decade.
Diversification sounds easy, but how to do it effectively?
The development of autonomous cars creates new investment opportunities.
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