Q2 2026 Fixed Income Perspectives

2026-04-21 23:59:00 ET

By Michael Goosay, Chief Investment Officer, Fixed Income

Introduction

At the start of the year, the macro environment was defined by resilient growth and moderating inflation - supporting expectations for gradual Fed rate cuts. Combined with attractive starting yields, this created a constructive backdrop for fixed income. That outlook has shifted with the escalation of conflict in the Middle East. With inflation still running above the Fed’s target, higher energy prices risk limiting the Fed’s ability to respond if growth slows or labor market conditions weaken. For now, economic growth and credit fundamentals remain intact, but the path forward is less certain. Despite heightened volatility, investor demand for income and portfolio ballast has not abated. While the conflict has pushed rates higher and modestly widened credit spreads, elevated yields provide improved compensation and support continued allocations to bonds.

Policy volatility: Navigating geopolitical and economic challenges

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