A US interest-rate cut may be on the horizon, but a JPMorgan Asset Management fund is turning away from emerging-market assets.

The money manager’s Global Income Fund has halved its holdings of developing-nation fixed income and equities to 3% each, opting instead to buy European corporate junk bonds and Treasuries, according to its co-manager Eric Bernbaum. The $50 billion strategy is skeptical about emerging Asia’s prospects due to the region’s exposure to the US-China trade war .

“The area that we’ve seen the most deterioration in — and the most weakness — is in the emerging-markets complex, particularly ex-China," New York-based Bernbaum said by phone. “We’re thinking of areas like Korea, Taiwan, Singapore -- those regions and countries that are very exposed to global trade uncertainty, disruption of supply chains and waning demand."

Bernbaum’s call serves as a warning as traders celebrate the coming U.S. interest-rate cut by piling into risk assets. Even if the Fed eases, Asia’s export-reliant economies must still contend with the damage wrought by the trade war, with no sign that the dispute will be resolved anytime soon.

While Washington has restarted high-level talks with Beijing, the truce is far from a game-changer, according to Bernbaum. Thorny issues such as intellectual property rights and cyber security still persist.

“I would say there would be no huge, ground-breaking resolution on the longer-term structural issues," Bernbaum said. “There’s still going to be ongoing uncertainty."

If preliminary data on South Korea’s exports are any guide, more weakness may be in store for emerging Asia’s economies. Shipments from Korea fell 2.6% in the first 10 days of July, with sales of semiconductors down by a quarter from a year earlier.

Fed Easing

The strategy, among JPMorgan Asset’s biggest mutual funds, sold the bulk of its five-year Treasuries holdings about a month ago and has been buying 10-year notes where it sees more value, Bernbaum said before Fed Chairman Jerome Powell’s testimony to Congress on Wednesday.

“If investors globally are looking for safe duration with some yield, the U.S. 10-year, the belly of the US curve, is actually not a bad place to be," he said.

JPMorgan expects the Fed to cut rates by a quarter of a percentage point in July, and potentially once more by year-end.

Fed Chair Powell indicated on Wednesday that policy makers are preparing to lower interest rates due to a cooling global economy and no sign of overheating in the jobs market at home.

Here are some of Bernbaum’s other views:

Slowing Growth

“In the U.S., while economic growth is slowing, it’s only just slightly below trend -- and we’re expecting it to stabilize around that between now and the rest of the year" While America will be impacted by the trade war, it’s “less exposed than other areas of the world — be it emerging markets, Europe or Japan"

Treasuries at 2%

“The low end of our range for 10-year Treasuries is about where we are today, which is 2%. Two to 2.75% is fair value. We absolutely think there could be slight downside risk to that" “We held our allocations in the shorter-end of the curve, we’ve now switched that to be more in the belly of the curve which we think is less richly priced" “We think the front end is very aggressively and in our opinion, too aggressively pricing in the extent of cuts by the central bank, but at the belly of the curve we find a bit more attractive because it’s less tied to the immediate reaction to the Fed cuts"

Junk Bonds

“High-yield is about 10% of our portfolio today, we continue to like European high yield" “Stabilizing growth with very accommodative monetary policy and lower interest rates will continue to be a supportive environment for carry"