BlackRock Inc. suggests that staying invested in credit markets to generate income is the most effective approach for navigating current market volatility. The firm's analysts noted in their quarterly fixed-income outlook that while geopolitical uncertainty has driven many investors to the sidelines, this volatility is creating opportunities for patient capital, particularly where asset pricing has diverged from underlying fundamentals.
This strategy is particularly relevant as central banks globally have begun cutting rates, which is eroding the income historically available from money market funds and other conservative bonds. With approximately $9.1 trillion in money market funds worldwide, the era of easy, risk-free income from cash is diminishing, prompting a shift toward more durable sources of yield. BlackRock highlights that yields on euro investment-grade corporate bonds are around 3.6%, a multi-decade high, contrasting with an average of less than 2% over the last decade.
BlackRock emphasizes that returns in 2026 are likely to be driven primarily by income or carry, rather than price appreciation. The firm advises maintaining short duration in fixed income and leaning into high-quality spread assets such as securitized credit, collateralized loan obligations (CLOs), and investment-grade corporates, where carry remains attractive relative to risk. They are selectively reducing exposure to high yield, where spreads are tight, and reallocating to areas offering better compensation per unit of risk.
