The fixation with tapering is blinding investors to other opportunities in the market, such as a potential buying period for emerging market debt.
That is according to the latest market commentary from Euro Stars AA-rated manager Iain Stealey, who oversees 11 bond funds across several fixed income sectors at JP Morgan.
Stealey said the first indication of the Federal Reserve beginning to taper quantitative easing, which was revealed five months ago, has become an unnecessary focal point for many investors.
While the decision to tighten the ultra-easy monetary policy is largely expected to take place at September’s meeting, Stealey is looking for new options.
He said: ‘Just as a watched pot never boils, trying to decode every utterance out of central banks has its limits. Investors need to see the wood through the trees.’
‘In this improving environment the Fed should be tapering, core government bond yields should be closer to 3% than 2% and risk assets should outperform.’
‘Allocations to high yield and corporate bonds with attractive spreads in a low default environment will continue to benefit portfolios.’
One area Stealey is paying particular attention to over the mid-to-long term is how this improving environment will feed into emerging markets.
‘Looking ahead the focus will revert to traditional data watching and the extent to which better developed market data spills over into the emerging markets where we’re already sharpening our pencils for a buying opportunity.’
The JPM Aggregate Bond fund has returned 13.84% over the three years to the end of July. This compares to a rise of 10.72% by its benchmark, the Barclays Global Aggregate TR EUR Hedged, over the same period.