Portfolio Chart: A menu of options as bond yields reset higher
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.
JPMorgan Multi Income Fund
While on a hike, a hiker can take various routes but changing weather conditions could sometimes have an impact on the journey.
It is similar to searching for income opportunities where amid periods of heightened market volatility, investors, based on their financial objectives and risk appetite, could adjust the allocation of fixed income, equity or other hybrid assets1 in a diversified portfolio to help manage risk2.
Just as a hiker would select the route or a combination of routes, according to stamina, objectives of the journey and weather conditions, we share some of our top convictions1 as we seek out multi-asset income opportunities in changing markets.
Trail 1: Dividend-paying stocks
The weather condition is a key factor in determining a hiking trail, just like how market conditions can play a crucial role in asset allocation. Dividend stocks are back in the spotlight supported by stronger earnings results as economies around the world gradually reopen. As illustrated in the chart 3, dividend stocks have lagged growth stocks in 2021, and we are seeing a rotation as vaccine efficacy improves.
We believe the stocks of some quality corporates could still present opportunities for dividend income, alongside growth potential.
Trail 2: High-yield corporate credit^
Some trails on rough terrain may be difficult to navigate but they do offer spectacular views. As a part of their overall trek, hikers could consider these ‘higher-yielding’ trails based on their fitness level and whether they are properly equipped to tackle the uneven terrain.
Depending on an investor’s financial objectives and risk appetite, fixed income assets with higher-yielding potential, such as some high-yield bonds^, can present relatively attractive opportunities. US defaults are low as the economic recovery supports corporate earnings growth. The fixed income assets of some European corporates could also present potential diversification benefits.
Other trails: non-traditional income sources
Some seasoned hikers may prefer to explore new trails when on a hike. Similarly, investors, depending on their financial objectives and risk appetite, could go beyond traditional income sources such as cash savings and government bonds in their investment journey. As a part of an overall diversified portfolio, we believe income opportunities can be found in non-traditional sources such as securitised5 assets and other hybrids (preferred equity and real estate investment trusts) across regions, sectors and asset classes.
JPMORGAN MULTI INCOME FUND
JPMorgan Multi Income Fund invests flexibly across different asset classes and markets globally to seek out a diverse range of compelling income opportunities1. Even amid periods of heightened volatility, we continue to invest flexibly, striving for a consistent income stream and growth opportunities.
As illustrated below, the primary holdings in the Fund include equities (45%) and high-yield bonds4 (26%), as of 31 January 2022.
Different assets react differently under changing market conditions. We believe that employing a flexible and dynamic approach across multiple income sources can help build a robust portfolio while managing risk2.