2025 moved from early-year volatility to a more stable regime as markets adjusted to the new U.S. policy mix and macro outcomes stayed better than feared, with resilient growth and supportive central banks.
Looking into 2026, the two core risks are inflation and fiscal policy: any inflation re-acceleration or pre-midterm stimulus could put renewed pressure on yields and deficits.
In fixed income, value looks limited in the front and belly of government curves, while the long end offers more selective opportunities, especially in Europe and the UK after an arguably excessive steepening. Credit spreads are very tight, so this is not a “buy everything” market but one requiring strong selectivity.
Value still exists, but it is scattered across higher-quality financial subordinated debt, selected U.S. utilities, European residential credit, and some longer-duration investment-grade names.
Watch the latest analysis by Gabriele Foà (Global Credit Portfolio Manager, Algebris Investments).
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