What’s ahead for investing as Election Day approaches
With less than a month to go before the US elections, we look at the investment implications for 5 major economic sectors.
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WHY INCOME INVESTING MATTERS?
A world of lower ratesA world of lower rates
- Market uncertainties have reinforced the dovish bias for central banks. In developed economies, central banks have elevated monetary stimulus to maintain market liquidity and keep rates low.
- With lower interest rates, traditional income sources such as cash savings and government bonds have come under pressure.
Unprecedented monetary stimulus1
1. Source: Bank of England, Bank of Japan, Bloomberg Finance L.P., European Central Bank, US Federal Reserve, J.P. Morgan Asset Management.
*New purchases of bonds are based on period to period changes in average holdings during the quarter across various asset purchase programs as reported by each respective G4 central bank (the Bank of England, the Bank of Japan, the European Central Bank and the US Federal Reserve), announced purchase plans of these central banks and J.P. Morgan Asset Management projections, converted to common currency by average monthly exchange rates.
Guide to the Markets – Asia. Data reflect most recently available as of 30.06.2020.
Forecasts, projections and other forward looking statements are based upon current beliefs and expectations, may or may not come to pass. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated.
Market uncertainties persist
- While the global economy is opening up from lockdowns, the road to full recovery is likely to be long and may take us to 2021 or beyond if a sustainable medical solution isn’t available. The possible revival of US-China trade tensions may also upset this recovery.
- Against this backdrop, investors are increasingly looking for alternative ways to broaden the sources of income for their portfolios.
Global economic growth struggling for full recovery2
2. Source: J.P. Morgan Economic Research, J.P. Morgan Asset Management.
Guide to the Markets – Asia. Data reflect most recently available as of 30.06.2020.
Forecasts, projections and other forward looking statements are based upon current beliefs and expectations, may or may not come to pass. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated.
HOW DO WE HARVEST INCOME OPPORTUNITIES?
Seeking multiple income sourcesSeeking multiple income sources
- Market volatility and lower yields are expected to stay. It’s time to embrace the challenges, differentiate and invest where opportunities can be found via a flexible approach.
- Income can be harvested from different sources, such as stock dividends and bond coupons, and these can be found globally across asset classes and regions3.
A range of income sources4
3. Yields are not guaranteed. Positive yield does not imply positive returns.
4. Source: Alerian, Bank of America, Bloomberg Finance L.P., Clarkson, Drewry Maritime Consultants, FactSet, Federal Reserve, FTSE, MSCI, NCREIF, Standard & Poor’s, J.P. Morgan Asset Management. Asset classes are based on FTSE NAREIT Global REITs Index (Global REITs), FTSE NAREIT USA REITs Index (US REITs), Bloomberg Barclays Global High Yield Index (Global HY bonds), J.P. Morgan Government Bond Index EM Global (GBI-EM) (Local currency EMD), J.P. Morgan Emerging Market Bond Index Global (EMBIG) (USD EMD), J.P. Morgan Asia Credit Index Non-investment Grade (Asia HY bonds), MSCI Emerging Markets Index (EM equity), MSCI Emerging Markets High Dividend Yield Index (EM high dividend equity), MSCI World High Dividend Yield Index (DM high dividend equity), MSCI Europe Index (Europe equity), MSCI USA Index (US equity), US 10-Year Treasury Note (US 10-year). Yields of EM high dividend equity and DM high dividend equity were as of 31.05.2020. Yield is not guaranteed. Positive yield does not imply positive return. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia 3Q 2020. Data reflect most recently available as of 30.06.2020.
Investments involve risk. Not all investments are suitable for all investors. Please seek financial advice before investing. Securities rated below investment grade are considered high-yield/ below investment-grade. Although they might provide higher yields than higher-rated securities, they could carry risk.
REITs: Real estate investment trusts; HY: High yield; EMD: Emerging market debt; USD: US dollar; EM: Emerging market; DM: Developed market.
Seeking diversification^
- Asset class performance varies under different market conditions. A diversified^ portfolio, as shown in the table, is better positioned to manage risks while paving the way for consistent performance.
- By dynamically adjusting the allocation of assets, portfolio managers can seek shelter in times of a down market and be positioned to capture growth opportunities as they arise.
Asset class returns vary5
^ Diversification does not guarantee positive return or eliminate risk of loss.
5. Source: Bloomberg Finance L.P., Dow Jones, FactSet, J.P. Morgan Economic Research, MSCI, J.P. Morgan Asset Management. The “Diversified” portfolio assumes the following weights: 20% in the MSCI World Index (DM Equities), 20% in the MSCI AC Asia Pacific ex-Japan (APAC ex-JP), 5% in the average of the MSCI EM Latin America and MSCI EM EMEA Indices (EM ex-Asia), 10% in the J.P. Morgan EMBIG Index (EMD), 10% in the Bloomberg Barclays Aggregate (Global Bonds), 10% in the Bloomberg Barclays Global Corporate High Yield Index (Global Corp. HY), 15% in J.P. Morgan Asia Credit Index (Asian Bonds), 5% in Bloomberg Barclays U.S. Aggregate Credit - Corporate Investment Grade Index (US IG) and 5% in Bloomberg Barclays U.S. Treasury – Bills (1-3 months) (Cash). Diversified portfolio assumes annual rebalancing. All data represent total return in U.S. dollar terms for the stated period. 10-year total return data is used to calculate annualised returns (Ann. Ret.) and 10-year price return data is used to calculate annualised volatility (Ann. Vol.) and reflects the period 30.06.2010 – 30.06.2020. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 30.06.2020.
Investments involve risk. Not all investments are suitable for all investors. Please seek financial advice before investing. Securities rated below investment grade are considered high-yield/ below investment-grade. Although they might provide higher yields than higher-rated securities, they could carry risk.
DM: Developed market; JP: Japan; EM: Emerging market; EMD: Emerging market debt; Corp. HY: Corporate high-yield; REITs: Real estate investment trust.
OUR INCOME SOLUTIONS
- Given the gradual recovery, we expect governments and central banks will remain accommodative in the coming months to support households and businesses6.
- Yields7 are likely to stay low and the hunt for income is expected to intensify. With the global economy stabilising, investors could seek yields7 in both equities and fixed income.
6. Forecasts, projections and other forward looking statements are based upon current beliefs and expectations, may or may not come to pass. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated.
7. Yield is not guaranteed. Positive yield does not imply positive return.
WHY J.P. MORGAN ASSET MANAGEMENT?
People, Teams & Assets
1,000+
investment professionals
Equities
US$407 billion
Multi-asset solutions*
US$223 billion
Fixed income & liquidity
US$1.3 trillion
Alternative investments
US$120 billion
~US$1.9+ trillion
assets under management (AUM)
Source: J.P. Morgan Asset Management as of 31.03.2020. Past performance is not necessarily indicative of future performance.
* AUM figures do not include custom glide path and retail advisory assets.
278
investment professionals^
9
locations
US$583 billion
assets under management (AUM)*
Source: J.P. Morgan Asset Management as of 31.03.2020.
^ Includes portfolio managers, research analysts, traders and investment specialists with VP title and above. There can be no assurance that the professionals currently employed by J.P. Morgan Asset Management (JPMAM) will continue to be employed by JPMAM or that the past performance or success of any such professional serves as an indicator of such professional's future performance or success.
* AUM figures are representative of assets managed by the Global Fixed Income, Currency & Commodities group and include AUM managed on behalf of other J.P. Morgan Asset Management investment teams.
87
investment professionals^
19
locations
US$223 billion
assets under management (AUM)*
Source: J.P. Morgan Asset Management as of 31.03.2020.
^ Includes portfolio managers, research analysts, traders and investment specialists with VP title and above. There can be no assurance that the professionals currently employed by J.P. Morgan Asset Management (JPMAM) will continue to be employed by JPMAM or that the past performance or success of any such professional serves as an indicator of such professional's future performance or success.
* AUM figures exclude retail advisory and glide path portfolios.
Returns, income or yields are not guaranteed. Value of investments or income accruing from them may rise or fall.
Diversification does not guarantee investment return and does not eliminate the risk of loss.
This information is generic, not tailored to any specific individual circumstances and should not be construed as investment advice. Risk management does not imply elimination of risks. Investments involve risks and are not similar or comparable to deposits, not all investments are suitable for all investors. Please seek financial advice and make independent evaluation before investing.
For more information, please call or email us. You can also contact your J.P. Morgan representative.