In what is undoubtedly a challenging environment for fixed income, what opportunities are available to investors who are able to loosen the constraints of their bond portfolios? Iain Stealey, International Chief Investment Officer of Global Fixed Income and Portfolio Manager for the JPMorgan Global Bond Opportunities Fund and JPMorgan Global Bond Opportunities ETF, discusses three of his team’s best ideas, and one to watch as markets shift through the year.
1. Capitalizing on consumption: Short-duration securitized U.S. credit
As a play on the strength of the U.S. consumer, we like securitized credit, where the credit risk lies in the ability of consumers to repay loans on their household purchases. Consumer confidence, although down from its October 2018 peak, remains elevated vs. the 10-year average.1
The sector offers an attractive combination of yield advantage (3% at the index level) and limited duration (2 years at the index level),2 and provides diversification to corporate credit allocations, as well as to mortgage-backed securitized products.
Product pick: Securitized car loans – compelling fundamentals given that 85% of U.S. workers require a car to get to work.3