For our Q2 Investment Outlook for advisors, I’m Riz Hussain with two minutes on fixed income opportunities for your clients. 

Here in the second quarter, the conflict in Iran continues to fuel market volatility while driving oil- and energy-related prices higher. As a result, expectations for a short-term interest rate cut by the Federal Reserve have been pushed out to at least late 2026. Given this backdrop, we think that quality intermediate maturity credit, for example, investment-grade corporate and municipal bonds continue to make sense. Here are three points we think are worth highlighting when talking with your clients. 

First, consider the role that high-quality bonds can play in rebalancing. After years of solid stock market returns, clients may have larger than intended equity allocations. Using bouts of market volatility to rebalance client allocations may enhance overall portfolio stability while creating a better balance between growth and income. This may set your clients on a better track to achieve their financial goals. 

Second, given the shape of the yield curve today, we currently favor intermediate-duration bonds, giving clients the opportunity to capture most of a longer duration in bonds yield, but with less potential volatility that comes with longer maturities. With regard to our quality focus, companies with investment-grade ratings have managed their balance sheets exceptionally well despite the macro crosswinds, supporting the multi-year lift towards higher overall credit quality. And for your high income clients, tax-equivalent yields on municipal bonds remain noteworthy. 

Third, remember that actively managed fixed income strategies like those available through separately managed accounts may make even more sense than usual during periods of extended market volatility. Active strategies can quickly fine-tune duration, credit exposures, and liquidity parameters to take advantage of shifting market conditions. 

When thinking about your clients’ fixed income needs, keep in mind that Schwab Asset Management offers a range of solutions from active separately managed accounts to mutual funds and low cost, transparent, tax-efficient ETFs.

If you have questions about fixed income and how to position strategies into clients’ portfolios, please reach out to us for a complimentary portfolio evaluation. Thanks for watching.

Past performance is no guarantee of future results. 

Investing involves risk, including loss of principal. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.  

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve. 

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors.  

Tax-exempt bonds are not necessarily a suitable investment for all persons. Information related to a security's tax-exempt status (federal and in-state) is obtained from third parties, and Charles Schwab Investment Management, Inc., dba Schwab Asset Management, does not guarantee its accuracy. Tax-exempt income may be subject to the Alternative Minimum Tax (AMT). Capital appreciation from bond funds and discounted bonds may be subject to state or local taxes. Capital gains are not exempt from federal income tax. 

Diversification strategies do not ensure a profit and do not protect against losses in declining markets. 

Schwab Asset Management® is the dba name for Charles Schwab Investment Management, Inc. Schwab Asset Management separate but affiliated companies and subsidiaries of The Charles Schwab Corporation.