Active Fixed Income

This week, there are a few things that we need to pay attention to: the large move in interest rates and what it means (and more importantly, what it doesn’t mean!); and the constant barrage of doom and gloom on energy and AI. Let’s jump in.

The exchange-traded fund (ETF) market is pacing toward a record-breaking year in 2026, driven by an unprecedented wave of new product launches and historic capital inflows.

The U.S. economy has traveled farther than most forecasters expected. Strong household spending, healthy labor markets and continued business investment have kept the expansion on course.

The appeal of a portfolio of individual bonds for many investors are the known qualities that they can provide: a known stream of cash flow, a known redemption value, a known redemption date, and a known yield; all of which are locked in at the time of purchase.

LPL Research analyzes S&P 500 margin expansion, assessing how much is structural versus cyclical and what that means for future earnings forecasts.

Global growth remains resilient but uneven. In the United States, expansion is supported by private demand, a stable labor market and AI investment, while Europe and Japan continue to show surprising strength despite ongoing risks.

Federal Reserve (Fed) chair Kevin Warsh has established his hawkish credentials. Franklin Templeton CIO, Sonal Desai sees scope for further yield curve steepening and a range of selective opportunities, based on capturing income and focusing on quality rather than counting on lower rates or tighter spreads.

Chris Galipeau and Taylor Topousis discuss high-conviction insights that go beyond media headlines.

In August, a flurry of ETF-related deals were announced and expected to close by early 2027. Goldman Sachs is buying NEOS Investments. T. Rowe Price plans to add F/M Investments. Victory Capital is acquiring First Eagle.

The K-shaped economy is real, and it is old. What changed isn’t the shape of the economy; it’s just that the media found a narrative that gets lots of clicks and views, and we let headlines do our thinking for us.

Throughout this Indexing Redefined series, we explored how traditional market-capitalization indexing ties portfolio weights directly to stock prices, creating hidden concentration risks. Furthermore, we discussed how fundamental indexing offers a disciplined alternative by weighting companies according to their real-world economic footprint. In this final installment, we address the dilemma investors face in highly concentrated equity markets.

According to the latest SPIVA U.S. Scorecard report, broader isn’t always better for active managers. Following a volatile start to the year, the S&P 500 rebounded sharply in the second quarter to gain 10% through June 30 thanks to robust corporate earnings.

The Federal Reserve (Fed) made something clear this week that markets had been reluctant to accept. Apparently, the easing cycle isn't paused, it's over for now.

In an environment marked by the Fed’s first rate hike in three years and ongoing market uncertainty, income-focused investors face a unique dilemma. While cash alternatives offer attractive yields in the short-term horizon, they leave portfolios vulnerable to reinvestment risk should the

Municipal bonds might still offer attractive tax-advantaged income and relatively stable credit quality for investors who understand the risks.

Stocks have recently hit new highs, supported by strong earnings growth, but the bond market is sending a more cautious signal.

The 2026 U.S. midterms are rapidly approaching, with major implications. Muni bonds, in particular, may be impacted.

Advancements in technology, combined with significant stock market gains in recent years, have created a new set of opportunities—and challenges—for investors. For example, investors holding a concentrated position in a highly appreciated stock may face a difficult trade-off between the risk of a market downturn and the potentially significant tax cost of diversifying the position.

With so much attention focused on what the Fed might do at its policy meeting this week, it’s a good time to look back at history to get a sense of how stocks might respond should policymakers hike rates as the market now expects. LPL Research had been characterizing the rate decision as a coin flip until Fed Chair Kevin Warsh’s hawkish comments at the Jackson Hole meeting and the strong August jobs report.

A week of rising oil prices and higher interest rates sent stocks lower across the board as investors increasingly priced in the likelihood that the Federal Reserve (Fed) will begin a rate-hiking cycle at its September 16 meeting. Following the August Consumer Price Index (CPI) report, futures markets implied an 88 percent probability that the Fed will, or at least should, raise rates at next week's meeting.

On September 2, TMX VettaFi Head of Research Todd Rosenbluth appeared on the Schwab Network to discuss ETF inflows nearing record highs in 2026 and the 50th anniversary of the first-ever index fund, the Vanguard 500 Index Fund. The fund’s ETF share class, which trades under the ticker VOO, is a bit newer, having launched in 2010.

Chris Galipeau discusses high-conviction insights that go beyond media headlines.

Is the AI infrastructure buildout one big trade in credit? So far, the market seems to think so. Spread dispersion – differences in borrowing costs among issuers – across the financing chain remains limited despite sharp differences in underlying risk. This contrasts with equities, where performance has become increasingly differentiated.

Last week, the refining margin on European gasoil, the benchmark that sets the price of diesel and heating oil across much of the world, closed at roughly $94 a barrel over Brent crude, according to Bloomberg data. That figure is normally somewhere between $12 and $18.

Attractive yields and resilient credit conditions are creating opportunities across fixed income, but uncertainty around inflation and interest rates makes flexibility, selectivity and disciplined risk management especially important.

In Part III, the focus will center on practical applications of this discipline. In particular, how advisors can integrate the methodology into modern asset allocation, and why it offers an evolutionary leap for passive investing that’s available through exchange-traded funds (ETFs).

Investors can’t get enough of ultrashort bonds. Driven by concerns over high equity valuations and rate volatility as the U.S. Federal Reserve mulls over the direction of interest rates, capital preservation strategies appear to be the elixir to help ease uncertainty. As such, ultrashort bonds have been seeing greater demand as traditional safe havens fall short on yield or carry unwanted duration risk.

One or a few high-performing stocks can provide a big boost to portfolio values. But they’re hard to come by and often struggle to maintain their momentum over time. Because these stocks increase portfolio concentration, investors must balance the risk of overexposure against the tax cost of diversifying. A thoughtful, tax-aware plan may help bring portfolios back in line.

While the name is new, Syzygy is not. Syzygy, formerly Research Affiliates, will extend our multi-decade sub-advisory relationships in asset allocation and long-only active equities and expand into other active diversification strategies in the coming quarters.

In this article, Russ Koesterich argues that momentum remains supported by strong earnings growth, making the factor attractive despite market risks.

Portfolio Managers Jonathan Coleman and Aaron Schaechterle outline why they believe momentum in small-cap stocks relative to large caps can continue, highlighting favorable earnings growth prospects, appealing relative valuations, and other structural tailwinds.

2026 began with 10-year Treasuries right around 4%, which many viewed as a comfortable place. The comfort came from some simple math—2 plus 2 equals 4. The long-term real yield on the 10-year Treasury was around 2% and the Fed’s inflation target is 2%.

With so much attention focused on what the Federal Reserve (Fed) might do at its policy meeting next week, it’s a good time to look back at history to get a sense of how stocks might respond should the Fed hike rates as the market (barely) expects.

Benchmark-Free has been a flagship strategy for half of GMO's history. As we approach our 50th anniversary in 2027, Ben Inker reflects on our first 25 years of Benchmark-Free investing.

For much of the past decade and a half, investors saw little reason to favor bonds over equities. Yields were low and returns were muted, especially in passive strategies. Equities seemed to offer a much clearer path to long-term capital appreciation. For many investors, bonds were, at best, ballast: a dull but generally stable component of a broader portfolio. Then the experience of 2022 had investors questioning even that view, as areas of high quality fixed income generated equity-like losses that eroded much of the prior decade’s real return.

LPL Research analyzes rising U.S. debt, Treasury yields, and fiscal trends, highlighting implications for markets and investors.

Chapter 3 of this series ended with a simple question. If the math so plainly says avoid big losses, respect valuations, and mind your timing, why does so much of the industry preach the opposite?

Bond markets around the world have trembled in the last week, as uncertainty continues to rise. A mix of geopolitical, trade, debt, and currency pressures have put immense pressure on yields. The Yen carry trade situation alone has soaked bond markets, but when combined with U.S. debt fears and Hormuz concerns, the picture has shifted.

The U.S. ETF market reached $16.4 trillion in AUM in August 2026, driven by record product launches and a defensive shift to Treasuries.

Chris Galipeau discusses high-conviction insights that go beyond media headlines.

I love ETF milestones and round numbers almost as much as I love watching football. There is something deeply satisfying about watching a fund hit a clean asset threshold. Crossing $500 million, $1 billion, or $2 billion in assets under management (AUM) is more than just a psychological victory. It signals real validation from financial advisors, provides greater liquidity, and lowers the risk of fund closure. Plus, as a fun bonus this week, our three featured funds all start with the letter B!

The “K-shaped” divide endures even as it evolves. Higher-income households keep benefiting from equity gains, home price appreciation, and solid earnings, while lower-income households face mounting pressure from elevated costs and tighter credit. But recent data suggest the story is becoming more nuanced.

Cerulli projects a $2 trillion surge in advisor-held alternatives over five years, as interval funds reshape how RIAs access private markets.

What if you could capture the potential gains of the S&P 500, but limit your losses if the market goes down? Or earn above-market income given the right stock market conditions? How about gaining some market exposure while protecting principal with FDIC insurance, up to applicable limits?

Stocks have enjoyed a powerful run off the spring lows and have largely shrugged off concerns around growth, inflation, higher interest rates, the effects of artificial intelligence (AI), geopolitics, and policy uncertainty. As the calendar turns to September, however, they are entering what has historically been, from a seasonality perspective, the most challenging month of the year for equities.

Anchoring is one of the most powerful—and underestimated—forces in financial decision‑making. Once an emotional label attaches itself to an idea, it becomes the lens through which people interpret everything that follows.

Geopolitical headlines can quickly move markets, but investors do not need to predict every headline to identify potential opportunity. The more useful question is what governments, businesses and consumers are doing in response to a changing strategic environment, and which companies may benefit.

US Treasury Secretary Scott Bessent made waves with his recent announcement that the Treasury would at least double the size of its buybacks of long-term debt in the coming months. He argues that long-term yields do not reflect fundamentals, suggesting that the Treasury's intervention is aimed to restore proper market functioning.

Highly concentrated US equity markets have been a consistent theme in recent years. Now, after the latest reconstitution of a major US equity benchmark, concentration is taking on a new form, with the Magnificent Seven’s grip loosening and semiconductor stocks gaining more influence. In essence, millions of passive investors received a new portfolio without making a single decision.

The high-yield market appears expensive at first glance. Spreads sit near the tight end of their historical range, which implies limited compensation for credit risk. However, spreads relative to their historical levels do not capture the full opportunity set of the asset class. Corporate fundamentals remain healthy, defaults are low, and the quality of today’s high-yield universe is higher than its long-standing reputation might suggest.

The backup in global yields since late February has reignited the debate over the potential knock-on effects for corporate borrowers, particularly through higher refinancing costs and weaker debt-servicing capacity.

Should the recent value rotation be viewed as a regime shift-driven change in market preference, or a simple reversal trade? We think there is a compelling case to be made for the former. In a regime of higher interest rates and stubbornly above-target inflation, the market is increasingly focused on capex intensity, free cash flow conversion, and the cost of capital.

The first two articles in this series were about behavior. This one is about arithmetic. There are three numbers that decide most of your investing life. Let’s do the math Wall Street skips, one number at a time.

A credit-allocation problem is complicating the Fed’s dual mandate, with current policy restrictive for many consumers and weaker borrowers, but less so for large corporates, higher-quality issuers, and borrowers with access to private credit.

As the month of August came to a close, the first index mutual fund got to celebrate a key milestone. The mutual fund in question is the Vanguard 500 Index Fund (VFINX), which originally launched on August 31, 1976.

Beneath relatively muted index-level volatility, single-stock implied volatility remains high. In today’s low-correlation environment, individual stocks are moving more independently, keeping single-name volatility high even as those moves offset at the index level.

San Antonio has been my adopted home for close to 40 years now. I’ve watched it grow through more than one boom cycle, but recent Redfin data suggests we could be looking at a bust.

Our real gross domestic product (GDP) forecast for 2026 is 2.5% (based on our Global Investment Management Survey) versus the Federal Reserve’s (Fed's) forecast of 2.2% and the Wall Street consensus of around 2%. The economy remains resilient and the consumer is strong.

Advisors did not slow down on exchange-traded funds in the second quarter. They added more of them, and pointed the money somewhere new, according to AdvizorPro’s Q2 2026 RIA ETF Trends report.

Treasury’s pivot toward long-bond buybacks gives duration buyers their first clear green light in months — and the November midterms may add a second leg.

We often hear that consumption accounts for roughly 70% of the US economy and that, as long as consumers keep spending, the economy will continue to grow. There is certainly some truth to that.

We think it’s time for investors to consider moving from a short-duration bias toward core (plus) bond portfolios. Valuations have become more attractive across fixed income, with all-in yields approaching compelling levels. We share our views on when and why.

For an asset often designated as a store of value, gold volatility has been especially apparent this year. After starting off the year with a high-paced record-setting run that lifted the metal to nearly $5,600 an ounce, including a 13% rally in January alone, momentum quickly faded as tensions with Iran ratcheted higher.