It would be an understatement to state that the world has been turbulent since the Covid pandemic inflicted pain and havoc on economies around the world. If the Global Financial Crisis was a wake-up call to boost regulatory oversight of the financial sector and markets, the pandemic highlighted how closely the world is interlinked now.
The inflation shock that followed the contagion forced central banks in developed markets to boost interest rates. The surge in inflation, caused by the clogging of supply chain and a splurge in government spending, has been brought under control although it is still above central bank targets.
Just when one thought things were returning to normalcy, a new world order has emerged following Donald Trump’s return to the White House for a second time.
Trump’s `Liberation day’ tariffs unveiled on April 2 raised the hackles of many US trading partners and threatens to upend trading rules that have been established over many decades. Key trading partners such as the UK, the EU and Japan have negotiated new deals during the 90-day pause in higher tariffs. But the new regime has unsettled many large economies, including China and India, and done universal damage to exporting models The president’s avowed aim of the tariffs is to improve both national security and voters wage prospects.
The US administration’s radical policy experiment is aimed at rebuilding the domestic manufacturing base through investment-driven growth and boosting real incomes of workers that have stagnated for years. Trump’s tariff plan is a key element of this strategy. While the policy could hold potential positive outcomes for the US economy in the medium to long-term, possible pitfalls may include reduced growth, higher inflation and a dent in business and consumer confidence, as well as the widening of the budget deficit.
60/40 portfolio is under pressure
Rolling four month correlation between S&P 500 and US treasuries
The term `globalisation’, which has dominated economic discourse for the past four decades, is now considered a dirty word by US policymakers. Across continents, populist parties are becoming mainstream, and they are seeking to undo the neoliberal global system that is seen as having failed too many people. We are witnessing the emergence of nationalist politics, bigger government footprints and growing distrust between nations. The independence of the Federal Reserve, the key driver of global markets, is also in question as Trump ramps up attack on its chairman.
In addition, geopolitical tensions are at the highest level since the Cold War ended, with the US trying to contain China’s emergence as a superpower, and Russia invading Ukraine, ostensibly to counter NATO’s expansion. The Israel-Iran conflict and the never-ending Middle East tensions continue to be a cause for concern. The so-called `peace dividend’ that had underpinned much of Western Europe since the end of Cold War seems to have ended, as countries including Germany boost defence spending following Trump’s threat to end the post-World War II transatlantic defence cooperation.
All these have huge financial implications. However, the market reaction so far has been mixed. Sky-high stock valuations could pose significant risks to investors if volatility increases. Particularly, the dominance of tech giants underscores market concentration risks. In fixed income, Trump’s `Big, beautiful bill’ could lead to a debt overload and further pressure long-end bond yields. Spreads in the corporate bond markets continue to be tight, leaving little room for any severe economic downturn. Traditional fixed income strategies have struggled to diversify in a meaningful way in this environment, and many were caught off guard following `Liberation Day’ when US Treasuries sold off.
In recent times, the macro environment has been so dynamic that even central banks have struggled to read the writing on the wall. The delay in raising interest rates in the face of surging inflation after Covid is a case in point. Therefore, we believe the flexibility to rejig the portfolio quickly and efficiently is very important.
The Nobel prize winning economist Harry Markowitz said diversification is the `only free lunch’, an absolute return approach to fixed income can provide this diversification. Apart from aiming to deliver positive performance, the important characteristic for an absolute return is to deliver diversifying returns when other asset classes are under pressure.
Managing drawdowns and maximising the upside
SARB & Global Agg rolling 12m returns
Two clear conclusions arise from this changing backdrop. Firstly, inflation will not go back in its box and will be more volatile, alongside a more volatile cycle giving more macro-opportunities for active investors. Secondly, diversification outside the US will continue, and the era of US dollar dominance is likely over, which will lower correlations between sovereign markets, open up global investing, and with it, relative value opportunities.
Jupiter’s Strategic Absolute Return Bond (SARB) fund aims to achieve consistent positive returns through cycles even while keeping drawdowns in check. We predominantly invest in very liquid highly rated sovereign instruments, which lends investors the flexibility and safety needed to navigate different economic cycles. Our edge comes in our flexibility both in how we formulate our strategy but also in the construction of the portfolio. Combining our strategy alongside the more traditional fixed income portfolios should therefore help investors diversify their end outcomes.
Rolling 12-month Performance (%)
| 01 Jul ‘24 to 30 Jun ‘25 | 01 Jul ‘23 to 30 Jun ‘24 | 01 Jul ‘22 to 30 Jun ‘23 | 01 Jul ‘21 to 30 Jun ‘22 | 01 Jul ‘20 to 30 Jun ‘21 | |
| Fund | 5.0 | 3.7 | 4.5 | 0.3 | 5.0 |
| Benchmark | 4.8 | 5.5 | 4.0 | 0.3 | 0.1 |
Past performance does not predict future returns. Returns may increase or decrease as a result of currency fluctuations. The performance data shown does not take account of the commissions and costs incurred on the issue and redemption of units. Source: 2025 Morningstar. All Rights Reserved. Fund performance data for I USD ACC is calculated on a NAV to NAV basis, income reinvested, net of fees. All information as at 30.06.2025 unless otherwise stated.
Strategy specific risks
- Share Class Hedging Risk - The share class hedging process can cause the value of investments to fall due to market movements, rebalancing considerations and, in extreme circumstances, default by the counterparty providing the hedging contract.
- Interest Rate Risk - The Fund can invest in assets whose value is sensitive to changes in interest rates (for example bonds) meaning that the value of these investments may fluctuate significantly with movement in interest rates.e.g. the value of a bond tends to decrease when interest rates rise
- Pricing Risk - Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.
- Contingent convertible bonds - The Fund may invest in contingent convertible bonds. These instruments may experience material losses based on certain trigger events. Specifically these triggers may result in a partial or total loss of value, or the investments may be converted into equity, both of which are likely to entail significant losses.
- Credit Risk - The issuer of a bond or a similar investment within the Fund may not pay income or repay capital to the Fund when due.
- Derivative risk - the Fund may use derivatives to generate returns and/or to reduce costs and the overall risk of the Fund. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
- Liquidity Risk (general) - During difficult market conditions there may not be enough investors to buy and sell certain investments. This may have an impact on the value of the Fund.
- Counterparty Default Risk - The risk of losses due to the default of a counterparty on a derivatives contract or a custodian that is safeguarding the Fund's assets.
- Bond Connect Risk - The rules of the Bond Connect scheme may not always permit the Fund to sell its assets, and may cause the Fund to suffer losses on an investment.
- Sustainability Article 8 - Investments are selected or excluded on both financial and non-financial criteria. The Fund's performance may differ from the broader market or other Funds that do not utilize ESG criteria when selecting investments.
For a more detailed explanation of risk factors, please refer to the "Risk Factors" section of the Scheme Particulars.
The value of active minds: independent thinking
A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
Important information
This webpage is intended for investment professionals and is not for the use or benefit of other persons. This webpage is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and investors may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. Holding examples are for illustrative purposes only and are not a recommendation to buy or sell. Issued in the UK by Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ is authorised and regulated by the Financial Conduct Authority. Issued in the EU by Jupiter Asset Management International S.A. (JAMI), registered address: 5, Rue Heienhaff, Senningerberg L-1736, Luxembourg which is authorised and regulated by the Commission de Surveillance du Secteur Financier. No part of this webpage may be reproduced in any manner without the prior permission of JAM/JAMI/JAM HK.In Hong Kong, investment professionals refer to Professional Investors as defined under the Securities and Futures Ordinance (Cap. 571. of the Laws of Hong Kong) and in Singapore, accredited and institutional investors as defined under section 4A of the Securities and Futures Act 2001.
This webpage is issued by Jupiter Asset Management (Hong Kong) Limited and has not been reviewed by the Securities and Futures Commission. You are advised to exercise caution. If you are in any doubt about any of the contents of this webpage, you should obtain independent professional advice. The value of investments and the income from them can fall as well as rise and may be affected by exchange rate variations, you may get back less than originally invested. Past performance is no guide to the future. This webpage is for information only and is not an offer to sell or an invitation to buy. In particular, it does not constitute an offer or solicitation in any jurisdiction where it is unlawful or where the person making the offer or solicitation is not qualified to do so or the recipient may not lawfully receive any such offer or solicitation. Any holdings and stock examples are used for illustrative purposes only and should not be viewed as investment advice. The views expressed are those of the presenter at the time of preparation and may change in the future. It is the responsibility of any person in possession of this webpage to inform themselves, and to observe, all applicable laws and regulations of relevant jurisdictions. The information and any opinions contained herein have been obtained from or are based on sources which are believed to be reliable, but the accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss from this information. www.jupiteram.com has not been approved by the SFC. If you would like to make references to any of the technical terms shown in this material please refer to the glossary page of our website at http://www.jupiteram.com/en/Glossary, or ask for professional advice.