Put your cash to work
With interest rates rising, a new pro-growth U.S. administration in office, and an increase in monetary policy uncertainty, many are wondering: What is the most effective way to manage my fixed income investments?
While many investors today are choosing to stay on the sidelines, waiting for the Fed to raise rates again, or waiting to receive more clarity from the new administration, we believe there are opportunities for fixed income investors looking to achieve a modest rate of return without taking excessive interest rate risk.
Our view is that the
Fed will raise interest rates gradually, with a greater impact at the shorter end of the U.S. yield curve over the next year. However, with the economy continuing to improve and the new administration favoring pro-growth policies such as less regulation, lower taxes and higher fiscal spending, we believe that the balance of risks is skewed toward higher rates. In this environment, laddered bond portfolios can serve as an attractive investment alternative for fixed income investors.
A laddered approach entails employing bonds of various maturities from short to longer term. One
of the key advantages of investing in a ladder is that it provides predictable cash flows, through semiannual coupon payments and transparent maturity schedules (in addition a ladder comprised of municipal bonds has an added tax benefit). This can be beneficial if you have specific liabilities to meet, or if you are looking for a regular stream of income.
We leverage J.P. Morgan’s awardwinning* research team to develop customized bond portfolios designed to meet the long-term objectives of each individual client, as opposed to pooled assets. If you would like to learn more about how we build portfolios and if one is appropriate for you, please contact me.