Bloomberg News reports that William Eigen sticks to the strategy that supported him to survive and thrive through the worst bond rout in history. Therefore, he kept most of the $8.8 billion JP Morgan Strategic Income Opportunities Fund in cash. Towards the end of August, about 63% of the portfolio remained in commercial paper, data, and cash-like instruments, as shown by the fund.
What is Eigen’s View?
As thriving business entities in Rhode Island informed him, Eigen’s economic thoughts convey more pain for the bond investors. According to him, the Federal Reserve might increase the interest rates at least once more, keeping it for 18 months. This would slow the economy and curtail inflation.
Bond Bulls
The bond bulls need to realize that the economy is stronger than they fathom and would be successful in dealing with higher rates than they think. The view expressed by Eigen is in alignment with the idea of Jamie Dimon, the Chief Executive Officer of JPMorgan Chase & Co. Jamie Dimon has sent a warning to the markets that the Fed might have to do more to fight inflation.
Bloomberg News reports that to abandon cash whose yield is above 5%, he would like to see yields on a longer term that will exceed the short-term counterparts. However, this was the first time this was the scenario since mid-2022. Aside from that, he also says that junk bond spreads might have to widen towards at least 700 basis points from the current 420.
He also pointed out that the fundamentals of inflation do not show signs of slowing down. It has been observed that the workers have more power at present as compared to what they had in the past. Ideally, one must have more than one income source by retirement so that considerable stress can be offloaded from the government pensions. Nevertheless, a major CPP error must be avoided at all costs.
