Introduction
Fixed Income at Jupiter is based on three simple attributes:
- Independent
- Truly active
- Specialist
At Jupiter, independence is central to our investment philosophy. We believe that managers who are free to express their own views — without being bound by a house view — are best positioned to generate long-term alpha for clients. That’s why our Fixed Income team is structured into distinct investment units, each empowered to form its own macro outlook and positioning across interest rates and credit risk.
Assigning investment strategies to specialists in different areas (e.g. macro, corporate credit) is key to make such model work.
Supporting all these strategies is our centralized Credit Research Team. This team plays a vital role in identifying opportunities across the corporate bond universe, ensuring our portfolios are built on deep, fundamental analysis.
Ariel Bezalel and Harry Richards on navigating a divergent global economy
Ariel Bezalel and Harry Richards are Investment Managers, Fixed Income
Global macro conditions heading into 2026 are increasingly defined by divergence rather than synchronization.
The U.S. economy continues to navigate a complex backdrop with strong forces in both directions. Growth momentum remains positive yet slower, supported by services strength and AI-driven capital expenditure, while traditional industries such as housing face persistent headwinds.
Labour market conditions have softened notably, driven increasingly by weaker demand rather than constrained supply. Alternative indicators point to a slowdown in hiring and rising layoffs, even as unemployment remains contained.
Valuations across risk assets remain elevated and represent a key vulnerability. Any correction in AI-related growth expectations could spill into broader market weakness via a negative wealth effect. Private credit and alternative lending channels continue to expand, though systemic risks appear limited. We remain on watch for any developments at the front end of the curve that highlight a potential liquidity need due to reserve shortages.
Inflation ex-tariffs continues to cool, particularly across services such as rents. Tariffs have likely added 30–40 basis points to headline CPI year-over-year, but this impact could fade as trade flows adjust. Easier monetary policy and upcoming fiscal rebates—particularly in the first half of 2026—may introduce upside risk to growth and inflation later in the year.
Market pricing for roughly three additional cuts by the US Federal Reserve (Fed) through end-2026 appears reasonable. However, scenarios at both tails remain plausible: a sharper slowdown could trigger further easing, while a mid-year rebound could limit accommodation. There may also be more question marks over Fed independence as the year progresses, and a new Fed Chair is appointed.
In the Eurozone, inflation remains contained but structural growth challenges persist. Competitive pressure from China and subdued productivity weigh on industrial momentum, while fiscal impulses—if executed effectively—could offer cyclical relief. France remains a focal point of risk due to political fragmentation and fiscal imbalances, whereas peripheral economies continue to demonstrate a somewhat more positive trajectory. Rate exposure across the region remains a useful hedge amidst ongoing uncertainty. The United Kingdom stands out as one of the most appealing developed markets. High yields, a weakening labour market, an improving inflation outlook and credible fiscal tightening may drive Gilt outperformance. Across Australia and New Zealand, growth and inflation dynamics are mixed: the RBA faces renewed upside pressure but little room to tighten further, while New Zealand’s earlier easing cycle stabilizes growth. We remain constructive across these markets. The curve in New Zealand remains steep on a relative basis, providing good carry and rolldown, and in Australia we believe the outlook is somewhat unclear as no cuts are priced in.
Investment implications reflect this dispersion. We favour a diversified exposure across the U.K., Eurozone periphery, and Australia/New Zealand. U.S. duration could serve as a hedge. In emerging markets, Brazil and Mexico offer attractive real yields and potential policy catalysts. In credit, spreads are likely to remain stable to modestly wider, supported by moderate growth, accommodative policy and, broadly speaking, strong fundamentals. Sector dispersion reinforces a defensive focus on healthcare, communications, consumer staples, and secured bonds, while financials continue to stand out for relative value and balance sheet strength.
Mark Nash on rethinking the macro environment
Mark Nash is an Investment Manager, Global Macro Solutions
In 2025, America’s economic exceptionalism began to fade. The US has lost its ability to grow meaningfully faster than its peers, a trend likely to persist into 2026. Much of this has been self-inflicted, stemming from US policy choices. Tariffs have, in effect, imposed a large tax on US consumers and companies, squeezing profit margins and undermining demand. Meanwhile, the halt in immigration into the US has tightened the labour market, reducing supply while removing an important source of spending power. Together, these forces are weakening both the demand and supply sides of the US economy.
Recent data show that demand is taking the bigger hit. Job creation has slowed sharply, unemployment is edging higher, and inflation is receding as the dominant concern. Weak growth, rather than overheating, now defines the outlook. That gives the US Federal Reserve (Fed) scope to ease monetary policy further. With the economy needing continued support, bond yields are likely to fall, and the US dollar should weaken structurally.
Investors have been searching for an alternative store of value as confidence in US growth and policy wanes. Other currencies have yet to mount a sustained challenge to the dollar, burdened by their own fiscal and trade headwinds, and so gold has become the preferred outlet. This all adds to the signs that US exceptionalism is downshifting, giving rise to opportunities in non-dollar assets like emerging markets, and supporting the view that yields need to fall and not rise.
Most importantly, opportunities have opened up for global macro investing. A falling dollar means both directional opportunities in under-owned markets, and also lower correlations between sovereigns, allowing a much more robust portfolio to be constructed.
Artificial intelligence (AI) offers another dimension to the story. AI promises a huge productivity boost and a positive supply shock, but in the short term it risks displacing workers faster than new industries can absorb them. For AI to support growth rather than suppress it, policy must help facilitate retraining, investment and capital expenditure (capex). That requires lower rates, a weaker dollar and a more supportive environment for business confidence.
AI: unemployment and lower inflation
AI adoption versus change in unemployment by sector.
The US may yet regain its mantle of economic exceptionalism. But for now, it is in a transition phase, one marked by softer growth, easier policy, and a world that is searching for new anchors of value.
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.
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.
Luca Evangelisti on the tight new world in AT1/CoCos
Luca Evangelisti is an Investment Manager & Head of Credit Research, Fixed Income
The European Financials sector has enjoyed a very positive 2025, with strong fundamentals reaching peak levels and valuations reflecting these improvements from both an equity and a credit perspective.
Looking at banks’ fundamentals from a credit perspective, we expect their strength to continue in 2026, also helped by lower interest rates (supporting asset quality) and generally large capital buffer in the context of an already substantially improved sector-wide profitability. In this context, EU Banks are very well placed to face the risk of a potentially slowing economy and the resulting potential increase in NPLs from currently historically low levels. While a few small and less diversified banks could potentially be more exposed to an economic slowdown, the vast majority of large financial institutions have sufficient capital buffer to absorb an increase in provision and a potential slowdown in bottom-line profitability.
Valuations are catching up with fundamentals, and they are increasingly challenging, especially for the senior part of the capital structure. AT1/CoCos spreads have tightened considerably, reaching historical lows during Q4 2025. That said, we believe fundamental strength will continue into 2026, further supported by positive supply technical. In recent years, issuers have taken advantage of favourable issuance spreads and opportunistically brought forward funding plans. Moreover, with a step down in 2026 first call dates relative to previous years, the currently tight spreads have the potential to compress further. Especially when compared to the more challenged corporate sector, we believe these dynamics could support the idea of AT1/CoCos spreads potentially trading inside corporate HY during the course of next year.
On a downside risk perspective, notwithstanding the above considerations, we remain focused on rationally balancing the upside and downside risks of our investments. We continue to believe that the marginal upside in going down the issuer- quality spectrum is not attractive enough to compensate for potential volatility. As a result, we continue to favour large and well-diversified banks with balance sheets solid enough to absorb even large economic shocks. For these reasons, careful name selection and instrument selection within the AT1/CoCos space remain of paramount importance to continue to protect the fund from markets volatility while still benefiting from the elevated yields offered by the asset class.
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.
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