- Search for income rapidly becoming more complex; investors need to rethink traditional approaches
- Juggling income and growth highlights investors' need for balanced exposure to equities
J.P. Morgan Asset Management analysis on UK and European investors' continued hunt for income highlights new complexities challenging investors to rethink conventional investment approaches. Unprecedentedly low yields on traditional income instruments continue to force investors towards riskier assets. J.P. Morgan Asset Management markets and economics data illustrates the complexities of assembling a diversified income portfolio that provides growth while managing risk.
Difficult to find ‘income' in traditional fixed income
European core government bond yields have fallen to historic lows as a result of ultra-loose monetary policy, the flight to safety during the eurozone debt crisis and weak domestic growth. As the chart below from J.P. Morgan Asset Management Guide to the Markets Europe illustrates, real interest rates are now negative across much of the developed world.
"Yields on traditional income investments such as cash are no longer keeping pace with inflation. An investor putting €100.000 in a one-year bank deposit in 2007 would have generated income of €4.580. Today that same investment would only generate a tenth of that amount," said Dan Morris, Global Markets Strategist, J.P. Morgan Asset Management.
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