Brighter outlook for equities as bond yields expected to rise
Parking funds in shares should give investors more protection than other asset classes given an anticipated rise in bond yields in the coming months, said JP Morgan Asset Management (JPMAM).
The asset manager attributed the brighter outlook for equities partly to the positive corporate earnings momentum on the back of stronger global economic growth.
"While we expect higher positive equity returns... it is possible we will get a technical correction in the third quarter, before moving higher again," said JPMAM global market strategist Jasslyn Yeo, who sees fundamentals supporting equities as economic growth is running above trend for most major developed and emerging markets.
"The risks of a recession remain low over the next 12 months," said Dr Yeo in the firm's investment outlook briefing yesterday.
The JP Morgan unit is cautious about British shares owing to uncertainties around Brexit, and it favours Europe, Japan and Asia ex-Japan over stocks listed in the US.
Dr Yeo said: "...We see limited upside on the S&P 500 given challenging valuations, but we want to be selective in this market."
She prefers markets such as China, South Korea, India, Thailand and Indonesia, with an "underweight" call on Singapore shares.
She said: "Within the Asean context, we see more opportunities and value outside of Singapore... that being said, we are overweight on sectors such as banks and real estate."
In view of rising bond yields, JPMAM is cautious over fixed income where "increasingly frothy valuations could turn into headwinds for further gains" in this quarter.
- THE STRAITS TIMES