US high yield
Tihana Ibrahimpasic, research analyst on multi-asset at Janus Henderson says with equities experiencing a market-wide dividend cut, making them a less reliable source of income in the near future, comparatively, fixed income may represent a more attractive proposition.
Ms Ibrahimpasic adds: “Spreads have come down since the market trough in March but remain attractive compared to history in some segments. Yields on assets such as US high yield and European investment grade as well as high yield are more appealing than 12 months ago.
“Additionally, coupons are less likely impacted given that they represent a contractual obligation and would result in a credit event if skipped, which is often a much more significant decision for company management than cutting or suspending dividends.”
For her, building a defensive income portfolio at this time would require a stronger emphasis on quality and liquidity.
She adds: “Stylistically it would be prudent to have a defensive quality tilt at the expense of having a more cyclical exposure.
“This could for example be achieved by reducing exposure to businesses with weak balance sheets and high leverage, and avoiding sectors most affected by the crisis such as travel and leisure, and energy.”