J.P. Morgan Asset Management is issuing a bullish outlook on an underweighted market segment: high-quality fixed income.
Priya Misra, the company’s portfolio manager, believes this is a “once-in-a-lifetime” opportunity for investors.
Misra said on CNBC’s “ETF Edge” this week: “You can actually take on credit risk in the highest-quality companies while still earning a 6.5% yield. So, you don’t actually need to downgrade credit quality.”
She noted that this strategy is particularly suitable for investors concerned about having too much exposure to artificial intelligence stocks.
Misra said: "The AI exposure is very large. Fixed income offers you a more diversified set of return sources. It’s not just AI trading or tech trading—you also have U.S. Treasury trading and credit assets outside of AI."
Misra co-manages the JPMorgan Core Plus Bond ETF (ticker: JCPB). According to company data as of August 31, the fund manages nearly $16 billion in assets, with over three-quarters of its holdings in debt rated BBB or higher.
She said, “We have actually increased some BB and B exposure because high-yield spreads have widened. We are positive on certain investment-grade bonds. Additionally, over the past few days, we have begun to add some duration, as we believe this interest rate cycle may be nearing its end.”
According to FactSet data, as of Friday's close, the JPMorgan Core Plus Bond ETF has declined more than 5% year to date.
Misra also noted: "You need to examine the macro environment bond by bond and sector by sector, while also conducting bottom-up analysis to ensure companies are not over-leveraged." She is concerned that higher interest rates could harm the housing market.
Joanna Gallegos, co-founder of BondBloxx, also advises investors to take advantage of the historically attractive yield levels in the debt market.
Gallagher said in the same interview: "You should indeed consider adding some corporate bonds to your portfolio. It’s in investors’ best interest to start paying attention to the returns that fixed income is once again offering—it can help offset volatility in your portfolio."
One of her bullish reasons is that the base interest rate is high and remains stable.
Gallardo added, "The fundamentals of these companies are very strong, and the economy continues to grow. We do believe this is being overshadowed by the narrative surrounding U.S. Treasury yields."
She is with BondBloxx, known for its fixed-income exchange-traded funds covering sectors such as U.S. Treasuries, corporate bonds, private credit, and emerging markets.
One of its underlying funds is the BondBloxx Private Credit CLO ETF (ticker: PCMM). According to FactSet data, as of Friday’s close, the fund is down 0.6% year to date.