Investing Ideas

Fixed income: A supportive ballast

By: Michael Plage Christine Thorpe

Updated: 7/27/2026

Key Takeaways

Fixed income is serving a renewed dual role in portfolios by generating attractive income potential while also acting as a stabilizer against equity and other growth-oriented risk exposures, reflecting a shift from the low-yield environment that constrained its usefulness post-financial crisis.
Higher starting yields have improved the return potential of fixed income, supporting a more constructive backdrop while allowing allocators to revisit its role not just as a defensive allocation but as a meaningful contributor to portfolio outcomes.
At the same time, persistent macroeconomic, fiscal and geopolitical uncertainty reinforces the importance of maintaining diversified and liquid fixed income allocations that can respond to market dislocations as they arise.
Active management may be particularly valuable in this environment, as tight credit spreads and growing dispersion across sectors and issuers create opportunities for security selection and risk management.
Expanding beyond traditional core bond exposures and incorporating global fixed income may help investors broaden their opportunity set and reduce reliance on any single market or economic outlook.

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