Explore core fixed income insights from our portfolio managers and research analysts.
The decision by the US Federal Reserve (the Fed) to start cutting interest rates is positive news for many fixed income investors, especially those engaging with emerging market debt (EMD). While EMD has often been viewed as a “risk on” investment, returns have generally been positive for the six-month period following a Fed rate cut for both emerging market foreign exchange (EMFX) and emerging market credit. Many investors expect a soft landing over the next six months—an outcome that has historically led to strong positive returns from EMD, as spreads typically compress given buoyant market sentiment. However, EMD returns have also been positive in a recessionary, harder landing scenario, driven by declining rates.
While geopolitical uncertainty and idiosyncratic risks may cause further volatility in the short term, structural improvements since the 1990s have made emerging markets fundamentally stronger, which is reflected in higher credit ratings. For investors new to EMD, all-in yields remain attractive, while the asset class hasn’t experienced the same extent of spread compression as developed markets. EMD sovereigns currently yield around 7.5%, which is 1.7 percentage points above the 10-year median yield. Meanwhile, EMD corporates yield about 0.8 percentage points more than the 10-year median, at around 6.3%.
Head of Emerging Market Debt,
J.P. Morgan Asset Management
Investment specialist,
Emerging Market Debt
EMD returns 24 weeks after Fed Cut
Source: Bloomberg, J.P. Morgan. As of 31 August 2024. Soft Landing Cuts = ‘95, ‘98, ’19. Recession Cuts = ’01, ’07. Opinions, estimates, forecasts, projections and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. There can be no guarantee they will be met. Past performance is not a reliable indicator of current and future results
Find out how we’re positioning our core fixed income portfolios, based on our latest economic and market views.
Inflation and labour markets have remained stubborn for some time, causing many major central banks to delay the start of their monetary easing cycles. However, there are signs that these key measures are beginning to ease, which paves the way for fixed income markets to deliver attractive risk-adjusted returns. We believe a strategy with an active approach to investing across the global fixed income spectrum is best placed to capitalise on the opportunities that could emerge as the tide turns for the asset class.
Research-driven security selection and disciplined risk management are at the heart of our fixed income portfolio building blocks. Download a chart pack or explore the fund for more information.
For further information about any of the funds featured above, or any of our fixed income range, please contact your local representative.
Dreikönigstrasse 37
Postfach
8027 Zürich
Email: info.zurich(at)jpmorgan.com
Rue du Rhône 35
Case postale 5507
1211 Genève 11
Email: info.geneva(at)jpmorgan.com
For investors evaluating portfolios as bond market conditions evolve, J.P. Morgan Asset Management offers fixed income solutions that span the risk spectrum, underpinned by the deep resources and rigorous research of a truly global platform.
For Professional Clients/ Qualified Investors only – not for Retail use or distribution.
This is a marketing communication and as such the views contained herein are not to be taken as advice or a recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management.
Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are, unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and may be subject to change without reference or notification to you.
The value of investments and the income from them may fluctuate in accordance with market conditions and investors may not get back the full amount invested. Past performance and yield are not a reliable indicator of current and future results. There is no guarantee that any forecast made will come to pass. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. This communication is issued in Europe (excluding UK) by JPMorgan Asset Management (Europe) S.à r.l., 6 route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg, R.C.S. Luxembourg B27900, corporate capital EUR 10.000.000. This communication is issued in the UK by JPMorgan Asset Management (UK) Limited, which is authorised and regulated by the Financial Conduct Authority. Registered in England No. 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP.
09rb241610153813