- Investment Strategist
Singapore, Individual
Change
The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed.
Key takeaways
- Even in a rising interest-rate environment, some global bond sectors remain resilient and may actually benefit from increased inflationary pressures.
- Defensive equity sectors and dividend payers may be poised to outperform the broader market if elevated inflation persists and/or the global economy sputters.
- Equity, fixed income, and multi-asset investment strategies that are both robust and flexible could allow investors to capture overlooked income and return opportunities in today’s volatile, uncertain market landscape.
Income investing is not just about “chasing yield”
Global markets have remained volatile amid central bank rate hikes, stubbornly high inflation, and ongoing geopolitical tensions. To help navigate these and other risks, many investors have recently turned their attention to investments that can potentially generate consistent income and steady total returns.
This is where income investing comes into the spotlight, which may seem like a straightforward enough concept. However, some investors may not realize that investing for income is not simply about “chasing yield” — in part because the highest-yielding assets may not always be the most attractive. For example, many higher-yielding companies could become hampered by a lack of capital when global markets enter periods of turmoil.
That’s why investors should consider taking an active, multifaceted approach to understand the “big picture” of income investing. Robust, yet flexible, investment solutions spanning across asset classes — including equity, fixed income, and multi-asset strategies — could allow investors to capture overlooked pockets of income and return opportunities, even under volatile market conditions.
REITs may be well placed to outperform going forward
In my view, defensive equity sectors and dividend-paying assets look likely to outperform the overall market in the period ahead, potentially helping investors weather the impact of high inflation on their portfolios. In particular, an allocation to real estate investment trusts (REITs), which have historically often outperformed both equities and bonds (Figure 1), could make sense these days. REITs may also be an excellent source of dividend income.
Figure 1
In the post-pandemic era, new investment income and return opportunities have emerged across different segments of real estate, including companies operating cell towers, data centers, warehouses, self-storage facilities, and health care properties. Moreover, the outlook appears bright for the real estate sector as a whole, which has a high proportion of defensive cash flow and may help hedge against inflation. Many landlords remain well positioned to maintain their rental income streams given the strength of renters’ demand, particularly in markets such as the US.
Rate hikes may be a tailwind for certain bond sectors
True to form, rising inflation and interest rates worldwide have posed stiff headwinds for many traditional rate-sensitive bonds this year. However, because not all bonds are alike, these same headwinds may act as tailwinds for other types of bonds. Indeed, some fixed income sectors have remained quite resilient and may even benefit from increased inflationary pressures. Examples include floating-rate bank loans and Treasury Inflation-Protected Securities (TIPS), which have continued to hold up well in the face of higher rates and inflation.
In addition, against today’s challenging macro backdrop, high-yield corporates, convertible bonds, securitized credit, and emerging markets (EM) local debt may outperform many conventional, investment-grade fixed income sectors. Residential mortgage-backed securities (RMBS) may also be worth a look, as the collateral typically benefits from rising home prices.
EM local debt may be more susceptible to global geopolitical factors than other fixed income sectors but should not be written off on that basis alone. Many EM central banks are well ahead of the Fed in hiking rates to help blunt inflation, while high commodity prices are a boon to some EM commodity exporters.
Multi-asset investments may be another piece of the puzzle
Income-oriented investors might also consider diversified, multi-asset investment strategies that leverage both traditional and complementary sources of income (such as real assets, options, and other fixed income assets). For example, covered-call options on single stocks may provide additional income potential, as might selling put options on high-quality stocks.
Prudent security selection is critical when investing in options. Trading options over corporate earnings announcements should be avoided in particular, as markets are likely to experience more extreme volatility around companies’ quarterly results.
Expect markets to remain volatile this year and into next
Lofty inflation, economic uncertainty, and central banks’ responses will likely continue to impact global markets through 2022 and perhaps into 2023. Geopolitical events this year, particularly the conflict in Ukraine and sanctions on Russia, have dealt a heavy blow to supply chains worldwide, causing shortages in agricultural, metals, and energy commodities and further stoking inflation. Higher energy prices and potential energy rationing in some regions could also weigh on various economies’ paths to recovery.
Harness the power of active management
With so many dynamic moving parts and so many different types of assets to choose from, investors shouldn’t go it alone. Partnering with a capable, experienced active investment manager may enable investors to capitalize on compelling income opportunities, while also effectively managing portfolio risk. That’s the power of active management.
Expert
Related insights
Showing
of
Insights Posts
Chart in Focus: The need to differentiate market growth from macro growth
Continue reading
3
min
Article
2025-09-30
Chart in Focus: Four key areas of opportunities in bonds amid Fed uncertainty
Continue reading
3
min
Article
2025-07-31
Chart in Focus: Broadening earnings growth signals healthy US equity market
Continue reading
3
min
Article
2025-07-31
URL References
Related Insights
Related funds
Read next
Showing
of
Insights Posts
Chart in Focus: What does the rate cut mean for equities and bonds?
Are rate cuts positive? On the heels of the much-anticipated initial Fed cut, in this article we look to historic precedent for where the markets could go in the coming months.
3
min
Article
2025-09-30
An active investor’s guide to growth equities
Our experts offer their view on the current economic environment, explore best practices for investing in high-quality growth equities, and highlight where they see opportunity now.
6
min
Article
2025-09-30
Chart in Focus: The need to differentiate market growth from macro growth
Macro growth and earnings growth have been misaligned for the last 15 years, particularly in the US and China, but in opposite directions. For equity investors, what would be the key to identify real growth?
3
min
Article
2025-09-30
Rate relief: Fed cuts half point, but says “economy is strong”
Our expert explains the Fed's bold rate cut and some key takeaways for investors.
3
min
Article
2025-09-30
Four investment perspectives amid a pivotal US election
How can investors reposition portfolios for a pivotal but highly unpredictable US elections? Nick Samouilhan explores potential avenues in conversation with three leading portfolio managers.
6
min
Article
2025-09-30
Harris vs Trump: The foreign policy and investment implications
Our expert examines expected Harris and Trump foreign policies and their potential impact on the investment landscape.
4
min
Article
2025-02-28
Walking a mile in Fed Chair Powell’s shoes
A slow roll on rate cuts by the Fed could frustrate markets and lead to more volatility ahead of the September FOMC meeting. See our take on what to expect for the next few weeks.
4
min
Article
2025-08-31
Massive market sell-off: Justified or an overreaction?
What's behind the global market meltdown, and what should investors consider doing? Global Investment and Multi-Asset Strategist Nanette Abuhoff Jacobson shares her views.
3
min
Article
2025-08-31
Chart in Focus: Four key areas of opportunities in bonds amid Fed uncertainty
We discuss four key areas of opportunities in fixed income amid Fed uncertainty in the second half of the year.
3
min
Article
2025-07-31
Chart in Focus: Broadening earnings growth signals healthy US equity market
Over the past year, the markets have seen the companies best poised to harness and benefit from new innovations within artificial intelligence rewarded accordingly. Can this signal more upside for the entire US equity market?
3
min
Article
2025-07-31
Time for credit selection to shine
Fixed income investors continue to seek answers to an era of volatile rates. Large, static exposures to credit markets no longer cut it. Instead, a nimble and dynamic approach is more likely to create resilient and consistent total return outcomes.
5
min
Article
2025-07-31
URL References
Related Insights
Past results are not necessarily indicative of future results and an investment can lose value. Funds returns are shown net of fees. Source: Wellington Management
© 2024 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. The Overall Morningstar Rating for a fund is derived from a weighted average of the three, five, and ten year (if applicable) ratings, based on risk-adjusted return. Past performance is no guarantee of future results.
The content within this page is issued by Wellington Management Singapore Pte Ltd (UEN: 201415544E) (WMS). This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. Information contained on this website is provided for information purposes and does not constitute financial advice or recommendation in any security including but not limited to, share in the funds and is prepared without regard to the specific objectives, financial situation or needs of any particular person.
Investment in the funds described on this website carries a substantial degree of risk and places an investor’s capital at risk. The price and value of investments is not guaranteed. The value of the shares of the funds and the income accruing to them, if any, and may fall or rise. An investor may not get back the original amount invested and an investor may lose all of their investment. Investment in the funds described on this website is not suitable for all investors. Investors should read the prospectus and the Product Highlights Sheet of the respective fund and seek financial advice before deciding whether to purchase shares in any fund. Past performance or any economic trends or forecast, are not necessarily indicative of future performance. Some of the funds described on this website may use or invest in financial derivative instruments for portfolio management and hedging purposes. Investments in the funds are subject to investment risks, including the possible loss of the principal amount invested. None of the funds listed on this website guarantees distributions and distributions may fluctuate and may be paid out of capital. Past distributions are not necessarily indicative of future trends, which may be lower. Please note that payment of distributions out of capital effectively amounts to a return or withdrawal of the principal amount invested or of net capital gains attributable to that principal amount. Actual distribution of income, net capital gains and/or capital will be at the manager’s absolute discretion. Payments on dividends may result in a reduction of NAV per share of the funds. The preceding paragraph is only applicable if the fund intends to pay dividends/ distributions. Performance with preliminary charge (sales charge) is calculated on a NAV to NAV basis, net of 5% preliminary charge (initial sales charge). Unless stated otherwise data is as at previous month end.
Subscriptions may only be made on the basis of the latest prospectus and Product Highlights Sheet, and they can be obtained from WMS or fund distributors upon request.
This material may not be reproduced or distributed, in whole or in part, without the express written consent of Wellington Management.
