As we look ahead to 2026 approaches, some of Jupiter’s leading income investment managers discuss the outlook for their asset class in the year to come.
Whether held for their role in contributing to the compounding of long-term total returns, or to provide an income for the underlying investor, income-generating assets remain a key part of global investment markets. There are many asset classes, regions of the world, and points on the risk-reward spectrum where investors can attempt to seek a consistent and/or growing income. Here, some of our experts who manage income-generating strategies give their opinion on what 2026 may have in store.
Jason Pidcock and Sam Konrad on technology and tailwinds in Asia
Jason Pidcock and Sam Konrad are investment managers, Asian Equity Income
We remain cautiously optimistic about the outlook for income investing in Asia Pacific equities, and would expect to see continued strong earnings and dividend growth from the companies we invest in.
We are long-term investors and wouldn’t want to try to predict how the market will perform next year. We could make some observations, however. It would be prudent to expect more moderate absolute returns from stocks given the strong performance of global equities – including – in Asia over the last three years.
We think that interest rates may fall further, and this should be a tailwind for markets. The US Federal Reserve (Fed) cut rates in 2025, and a new Fed chair will be appointed in May by President Trump, who has been urging the central bank to lower rates further.This should make it easier for central banks in Asia to cut rates, especially as there's less inflation pressure in Asia. Another tailwind is the potential for the US dollar to weaken, which historically has been supportive for Asian equities. We also think Asia looks good on a relative basis, in that the region’s economy and markets are diversified and not overly dependent on a single industry.
We see good opportunities in technology, and we think Asia is well placed to benefit from the long-term growth around AI. A handful of Asian companies, mostly based in Taiwan and South Korea, are key enablers of AI, in our view, as suppliers to the US technology giants known as the Magnificent Seven (including Nvidia, Apple, Microsoft).
Beyond technology, we think gold mining stocks are a sensible way to gain exposure to the precious metal at a time when macro-economic trends are supportive. We also see opportunities in the defense, financials and consumer staples sectors.
Adam Darling on the importance of discipline and patience in high yield bond market
Adam Darling is an Investment Manager, Fixed Income
It’s well known that high yield bonds, as an asset class, can deliver strong risk-adjusted returns over the long term. However, investors have to be aware of the inherent cyclicality of valuation within the market as credit spreads move up and down in sync with investor sentiment and economic fundamentals.
Currently, credit spreads are at the tight end of historical ranges, reflecting that demand for the asset class outstrips supply at a time when investors are very bullish about the outlook for risk assets. This environment calls for a patient and disciplined approach to investing as any spread widening due to unforeseen events such as a sharp economic downturn can hurt one’s portfolio. At the same time, it’s important to stress that there is good carry in the market and the yields remain attractive over the longer term
Historical spread, last 10 years
Understanding company fundamentals is always important, particularly when broad valuation is less compelling. As an example, cyclical sectors in the high yield market have been really weakening quite aggressively recently, particularly chemicals and some of the industrials. That's a theme to keep an eye on, as it may present an opportunity for investors. Those cyclical sectors could also be highlighting weaknesses in the economy which risk markets are too complacent about. A lot of focus at the moment is on the labour market, where unemployment rates seems to be gradually ticking up. The question is whether this is a leading indicator of a potential recession, or simply a temporary factor that will fade again.
Markets came into 2025 with quite expensive valuations, and at this rate, the year may end with similarly expensive valuations. Risk markets, such as the high-yield asset class, have remained robust this year, although there was some panic around Liberation Day when U.S. President Donald Trump announced reciprocal tariffs on most trading partners. Although the shock factors associated with tariffs are now behind us, there remains a great deal of uncertainty on that front, and the final word has not yet been said.
In terms of specific sectors and geographies, we continue to see some attractive opportunities. US healthcare, particularly hospital companies, has attractive investment features, as the sector enjoys bipartisan political support and is trading cheaply relative to the more cyclical areas of the market. We are also closely monitoring cyclical sectors such as chemicals, which have been beaten up, as well as Brazilian credit where a series of corporate shocks have worried investors.
Overall, in a complacent bull market, investors shrug off risks such as the possibility of a recession. But as an active investor, it’s important to stay cautious and disciplined, even while scouting for investment opportunities.
Dan Carter and Mitesh Patel on equity investors holding corporate Japan to account
Dan Carter and Mitesh Patel are investment managers, Japanese Equities
Reforms to corporate governance and capital structure have been a feature of the Japanese market for over a decade. The fabled Three Arrows of the early Abe period of 2013 metamorphosed into a widespread campaign by the country’s economic and financial establishment which culminated in the public admonishment of Japan’s listed corporate sector by the head of the Tokyo Stock Exchange in 2023.
Given the omnipresence of the theme, it is easy to take it for granted and to brush over the positive effects it has had for income seeking investors over that period and since. As companies have sought to become more efficient in their use of capital, they have increasingly returned it to shareholders. Share buybacks have exploded but dividend payout ratios have increased too. As we head into 2026, with a new Prime Minister in Sanae Takaichi and an ever-changing global landscape, can we expect this happy status quo to persist? Or will it evolve once again, and if so, will this be to the benefit or detriment of income investors?
As a protégé of Shinzo Abe, Takaichi should look to continue the legacy of the late godfather of Japanese corporate reform. Her populist streak and instinct to alleviate inflationary pressures on households should not be allowed to detract from one of Japan’s great success stories of recent years. In any case, other motivated parties including the Tokyo Stock Exchange and vocal investors from highly engaged long-term shareholders like us to the rather noisier posse of activists flocking to Japan, are sure to continue holding Japanese business to account.
We think change is on the cards, though. The efficacy of large one-off share buybacks is being called into question because the effects on share price are often transient. We hope that this shifts corporate attention back towards dividends – more persistent in nature, they should be rewarded more permanently by the market. Finally, we think the reform agenda will shift towards fundamental change in Japanese companies’ operations instead of focusing upon balance sheet structure. Japan has too many conglomerates and too-low profit margins. Restructuring is the watch-word with greater focus, better margins and higher returns the outcome. With higher profits can come higher dividends – the prize for income investors in Japan.
The value of active minds: unabhängige Denkansätze
Ein wesentliches Merkmal des Investmentansatzes von Jupiter ist, dass wir unseren Fondsmanagern keine Hausmeinung aufdrücken, sondern ihnen die Freiheit geben, eigene Ansichten zu den Anlageklassen zu formulieren, auf die sie sich spezialisiert haben. Daher ist zu beachten, dass alle geäußerten Ansichten – einschließlich derjenigen, die sich auf Umwelt-, Sozial- und Governance-Erwägungen beziehen – die des Autors/der Autoren sind und von den Ansichten anderer Jupiter-Anlageexperten abweichen können.
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