Webconference replay: JPM US Equity Income Fund (February 2015)Contributor JPMAM UK
US equity investors should brace for an increase in volatility in 2015 as the Federal Reserve (Fed) interest rate rises are on the horizon and the global oil price languishing at a low. In this webconference, Fiona Harris, client portfolio manager for the JPM US Equity Income Fund , talks about the importance of stock selection in a market environment that is leading to increasingly differentiated performance among corporate winners and losers, and looks at how the fund is positioned for the year ahead.
- The sharp decline in the global oil price had a significant impact on the US equity market in 2014, and we believe this continues to be the case. However, excluding energy stocks, S&P 500 companies could deliver average earnings growth of just over 10% this year, with the outlook for the financials and consumer discretionary sectors particularly positive.
- Corporate America broadly remains in good health. Many companies with strong balance sheets are rewarding investors through good capital allocation decisions – sustaining or growing their dividend payouts, as well as engaging in share buy-backs or mergers and acquisitions activity. The fund retains its focus on quality companies with strong management teams that make good capital allocation decisions that are attractively valued and pay a dividend.
- While the timing of the Fed’s first interest rate hike is uncertain, we can anticipate that rates will be higher 12 months from now. Past experience shows that when rates rise from a low base level (as is the case currently), US equities can still generate positive returns. It is only when the yield on the 10 year treasury is coming close to 5% and rising that equity markets tend to be negatively affected.
- The fund is overweight the financial services sector, with holdings in over 20 companies. Our exposure is focused on banks, insurance companies and diversified financials, and we find regional banks particularly attractive. Within the consumer sector, the fund manager tends to have a preference for retail names.
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