Taking flight with fixed income as inflation stays high
We share our views on the fixed income themes and opportunities in current choppy markets.
Key takeaways:
Every quarter, our GFICC senior investors gather to formulate a consensus view on the near-term fixed income markets. The result of this is a strategy roadmap for the coming three to six months.
Scenario expectations
GFICC Scenario Probabilities and Investment Expectations: 4Q 20214
4. Source: J.P. Morgan Asset Management’s GFICC Investment Quarterly (IQ). As of 15.09.2021. 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. Above-trend: Global gross domestic product (GDP) growth >3.5%, inflation >2%; Sub-trend: Global GDP growth 2-3.5%, inflation 0-2%; Recession: Global GDP growth <2%, inflation <0%; Crisis: A disorderly movement in markets causes systemic impact and tail risk. Provided for information only and not to be construed as investment recommendation or advice. Forecasts and estimates are indicative, may or may not come to pass.
How transitory is inflation and what does it mean for central banks?
Interest rates and inflation5
5. Source: BLS, FactSet, Federal Reserve, J.P. Morgan Asset Management. Real 10-year Treasury yields are calculated as the daily Treasury yield less year-over-year core CPI inflation for that month except for September and August 2021 where real yields are calculated by subtracting out September 2021 year-over-year core inflation. Data are as of 30.09.2021.
How we are optimising opportunities in current market conditions
Explore income opportunities
Conclusion
Our GFICC team believes that economically, global growth has crested and the path forward could be bumpier. Investors, based on their investment objectives and risk appetite, could consider a diversified portfolio and tap into relatively attractive income and risk-adjusted return potential by investing flexibly across multiple debt markets.
This content represents our GFICC team’s current view and overall strategy provided for information only based on current market conditions not taking into consideration any specific investor’s investment objective and risk appetite. Not to be construed as investment recommendation or advice.
Diversification does not guarantee investment return and does not eliminate the risk of loss.
1. Source: J.P. Morgan Asset Management’s GFICC Investment Quarterly Meeting (IQ Mtg). As of 15.09.2021. Opinions, estimates and forecasts may or may not come to pass. Provided for information only. These represent GFICC team’s views under normal market conditions subject to change from time to time.
2. For illustrative purposes only based on current market conditions, subject to change from time to time. Not all investments are suitable for all investors. Exact allocation of portfolio depends on each individual’s circumstance and market conditions.
3. High-yield credit refers to corporate bonds which are given ratings below investment grade and are deemed to have a higher risk of default. Yield is not guaranteed. Positive yield does not imply positive return.
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