2026 Fixed income outlook:
Structural shifts create strategic opportunities

Our 2026 investment themes point to a global fixed income landscape that is more differentiated, more policy-driven and ultimately more investable than in recent years. Fiscal policy will play a larger role in shaping yield curves and term premiums, requiring investors to look beyond the traditional focus on central bank reaction functions. Meanwhile, the narrowing distinction between developed and emerging markets underscores the importance of assessing institutional credibility, political continuity and policy frameworks across all major economies — not only in emerging markets (EM) as in the past.

Despite these structural shifts, the underlying macro environment remains fundamentally constructive. Growth is set to improve across key regions, inflation continues to moderate and corporate balance sheets remain healthy. While valuations across traditional credit markets are tight by historical standards, they have been supported by strong inflows and resilient fundamentals, suggesting opportunities still exist for selective investors.

In this environment, we believe the most effective approach combines discipline and creativity: maintaining exposure to high-quality and durable sources of income, recognizing the growing relevance of fiscal dynamics and diversifying across sectors that offer attractive risk-adjusted returns, including securitized credit, municipals, preferred securities, leveraged finance and segments of EM debt. By combining a clear understanding of evolving policy regimes with thoughtful portfolio construction, investors can position effectively for a cycle that is more stable than feared, yet more nuanced than in the past.