Volatility in perspective
Global market swings and elevated uncertainty can be unsettling. Still, there are ways to help investors achieve their long-term investment objectives.
These principles can help investors stay calm and rational in a volatile environment.
In challenging times, it is always useful to keep a few things in perspective.
Stay focused.
First, volatility is normal, and market declines are part and parcel of investing.
The urge to exit can be overwhelming when markets are falling, but doing so may mean selling at the most inopportune time and missing potential market rebounds. This can be costly for portfolios in the long run.
While periodic pull-backs are not uncommon, 25 of the last 35 years have ended with positive returns for the MSCI All Country World Index.
This underscores the importance of patience and perseverance to ride out choppy markets. Investors should not let short-term volatility derail their long-term investment plans and stay focused on their end goal.
Volatility is normal. As a general macro trend, annual returns of the MSCI All Country World Index were positive in 25 of the last 35 years despite average intra-year drops of 15.4%.
MSCI All Country World Index annual price return and intra-year declines (1988 – 2022)
Source: Bloomberg, J.P. Morgan Asset Management. Data as of 30.12.2022. Max intra-year price declines refer to the largest market drops from a peak to a trough during the year. For illustrative purposes only. Past performance is not a reliable indicator of current and future results. Average annual return between 1988 to 2022 was 6.9%.
Stay invested.
Second, investing is about time in the market, not timing the market.
For one, the range of return outcomes narrows considerably and skews positive over longer time horizons.
It is also worth noting that over the last 72 years ending December 2022, a 50/50 portfolio of US equities and fixed income has not posted negative returns over a rolling 5-year, 10-year or 20-year investment horizon1.
While there is no guarantee of future returns, the data demonstrates the importance of staying invested and focusing on the long-term.
The longer the holding period, the higher the chances of opportunities for positive returns as the range of potential outcomes narrows.
Range of equity, fixed income and 50/50 portfolio annualised total returns, 1950-2022
Source: Bloomberg, FactSet, Federal Reserve, Robert Shiller, Strategas/Ibbotson, J.P. Morgan Asset Management. Data as of 30.12.2022. Returns shown are based on calendar year returns from 1950 to 2022. Equity represented by the S&P 500 Shiller Composite. Fixed income represented by the Strategas/Ibbotson index for periods from 1950 to 2010 and Bloomberg Aggregate index thereafter. Past performance is not a reliable indicator of current and future results.
Stay diversified.
Third, diversification can be useful to ease the journey through choppy markets.
Diversifying portfolios across a variety of negatively correlated and/or uncorrelated asset classes can help manage the risks during a market downturn.
As an illustration of the macro trend, a well-diversified portfolio2 has recorded average returns of around 3.9% annually over the last decade, comparing favourably with other individual asset classes.
Such a portfolio also experienced just two-thirds of the volatility of developed market equities and less than half of the volatility of emerging market equities.
As such, diversification helps not only to mitigate volatility, but to harness opportunities across various asset classes.
A diversified portfolio has posted reasonable returns with meaningfully lower volatility versus equities over the last decade.
Annualised performance and annualised volatility (2013-2022)
Source: Bloomberg L.P., Dow Jones, FactSet, J.P. Morgan Economic Research, MSCI, J.P. Morgan Asset Management. Data as of 30.12.2022. 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 MSCI EM ex-Asia (EM ex-Asia), 10% in the J.P. Morgan EMBIG Index (EMD), 10% in the Bloomberg Aggregate (Global Bonds), 10% in the Bloomberg Global Corporate High Yield Index (Global Corporate High Yield), 15% in J.P. Morgan Asia Credit Index (Asian Bonds), 5% in Bloomberg US Aggregate Credit–Corporate Investment Grade Index (US IG) and 5% in Bloomberg US Treasury –Bills (1-3 months) (Cash). Diversified portfolio assumes annual rebalancing. All data represent total return in US dollar terms for the stated period. Past performance is not a reliable indicator of current and future results. Diversification does not guarantee investment returns and does not eliminate the risk of loss.
Positioning for resilience with income solutions
In addition to diversification, income in the form of coupons from bonds and dividends from stocks can help create a cash flow buffer for portfolios.
These cashflows can also be reinvested to help harness valuation opportunities that emerge in periods of volatility. As such, income investing helps not only to manage volatility but capture opportunities to tap the broader market upside.
Rigorous bottom-up security selection, diversification across and within asset classes, markets and sectors, and flexibility to adjust allocations are essential to building resilient income-focused portfolios.
From regional-focused funds to globally diversified fixed income and multi-asset funds, our active income solutions can help balance the search for opportunities with a focus on risk management amid elevated volatility.
This unconstrained, global fixed income fund seeks to deliver relatively attractive and consistent yield, with lower volatility than individual sectors.
Seeking attractive income through diversification
The Fund seeks out income opportunities across the entire fixed income spectrum with active duration3 management to navigate a changing interest rate environment.
Seeking high yield⁴ - like income with lower volatility
Diversification achieved by investing broadly and strategically in uncorrelated or negatively correlated sectors has helped the Fund seek out high yield4- like income with lower volatility.
Seeking resilience in the face of market challenges
The Fund has navigated a volatile 2022 with meaningfully lower drawdown versus the conventional 60/40 equity-bond multi-asset and pure US high yield4 portfolios^.
^Past Performance is not indicative of current or future results. [Click here for the full performance data]
Make the most of a wide income opportunity set with a fund that can invest flexibly across 15 asset classes, 3000+ securities and 90+ markets.
Relentlessly pursuing income opportunities
The Fund seeks to deliver consistent income with a balanced level of risk through a flexible and diversified portfolio that harnesses the power of income generating investments globally.
More than a decade of robust results*
Over the last decade, the Fund has not only demonstrated the ability to cushion the downside, but also participate in the upside as markets recover.
Flexibility to meet a range of income needs
The Fund has the flexibility to meet a range of income needs through various distribution share classes**.
*Past performance is not indicative of current or future results. [Click here for the full performance data.]
**The declaration and payment of dividends is at the discretion of the manager and is subject to the dividend policy referred in the Offering Documents. Please refer to the Offering Documents for details on the Fund’s investment strategy including risk factors and the dividend policy. Dividends are not guaranteed.
An all-weather fund that adopts a diversified multi-asset approach in the hunt for yield in Asia Pacific.
A diversified approach to income investing in Asia Pacific
The Fund dynamically adjusts allocations to harness high conviction income opportunities across stocks and bonds in the Asia Pacific region (excluding Japan).
Seeking opportunities across traditional and growth sectors
The Fund taps attractive dividend opportunities via a flexible mix of stocks across traditional income sectors like real estate investment trusts (REITs) and banks as well as growth sectors like technology.
Harnessing Asia’s fixed income potential
Asian bonds present relatively attractive yields with lower correlation to US Treasuries, bringing potential diversification benefits. The Fund also manages duration3 actively to navigate the changes in interest rates.
Selected funds are available at the following distributors:
Provided for information only based on market conditions as of date of publication, not to be construed as offer, research, investment recommendation or advice. The manager seeks to achieve the stated objectives. There can be no guarantee the objectives will be met.Indices do not include fees or operating expenses and are not available for actual investment.
Diversification does not guarantee investment return and does not eliminate the risk of loss.
1. Source: “How do investors navigate market volatility.” J.P. Morgan Asset Management, 13.05.2022.
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. Duration is a measure of the sensitivity of the price (the value of the principal) of a fixed income investment to a change in interest rates and is expressed as number of years.
4. 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.
JPMorgan Income Fund is the marketing name of the JPMorgan Funds - Income Fund.
JPMorgan Global Income Fund is the marketing name of the JPMorgan Investment Funds – Global Income Fund.
JPMorgan Asia Pacific Income Fund is the marketing name of the JPMorgan Funds - Asia Pacific Income Fund.
By using this information, you confirm that you are a Singapore resident and you accept the Terms of Use as set out in https://www.jpmorgan.com/sg/am/per/.
This website is meant for informational purposes only and is intended solely for the person to whom it is delivered. Except as indicated on this website or otherwise with express consent from JPMorgan Asset Management (Singapore) Limited, it may not be reproduced or distributed, in whole or in part, to any third parties and in any jurisdiction.
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. It does not constitute investment advice and it should not be treated as an offer to sell or a solicitation of an offer to buy any fund, security, investment product or service. The information contained herein does not constitute J.P. Morgan research and should not be treated as such.
Investments involve risks. Investments in funds are not deposits and are not considered comparable to deposits. Past performance is not a guarantee or necessarily indicative of future results and investors may not get back the full or any part of the amount invested. Dividend distributions if any are not guaranteed and are made at the manager’s discretion. Fund’s net asset value may likely have high volatility due to its investment policies or portfolio management techniques. Funds which are invested in emerging markets, smaller companies and financial derivative instruments may also involve higher risks and are usually more sensitive to price movements. Any applicable currency hedging process may not give a precise hedge and there is no guarantee that any hedging will be successful. Investors in a currency hedged fund or share class may have exposure to currencies other than the currency of their fund or share class.
Not all investment ideas referenced are suitable for all investors. Investors should make their own evaluation or seek independent advice prior to making any investment. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. The information provided herein should not be assumed to be accurate or complete and you should conduct your own verification. References to specific securities, asset classes and financial markets and any forecast contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. J.P. Morgan accepts no legal responsibility or liability for any matter or opinion expressed in this material.
The funds mentioned in this document have been approved as recognised scheme(s) under the Securities and Futures Act, Chapter 289 of Singapore. Any offer or sale, or invitation for subscription or purchase of the Fund(s) must be accompanied with the relevant valid Singapore Offering Documents (which incorporates and is not valid without the relevant Luxembourg prospectus). Please refer to the Singapore Offering Documents (including the risk factors set out therein) and the relevant Product Highlights Sheet for details before any investment at https://www.jpmorgan.com/sg/am/per/
The funds seek to achieve the investment objectives stated in the offering documents, there can be no guarantee the objective will be met. Investments in the Fund are not deposits and are not considered as being comparable to deposits. Fund’s net asset value may likely have high volatility due to its investment policies, exposure to emerging markets, financial derivatives instruments or portfolio management techniques. The value of the units in the scheme and the income accruing to the units, if any, may fall or rise. Past performance is not indicative of current or future results and investors may not get back the full or any part of the amount invested.
This material is issued by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K). All rights reserved..
For Fund or Institutional enquiries, please call or email us. You can also contact your financial advisor or your J.P.Morgan Representative.