Investors have an opportunity to grab solid income and hedge any surprises coming from the Federal Reserve this year, according to Invesco’s Jason Bloom. The Fed is scheduled to meet this week and is widely expected to hold rates steady, after reducing the federal funds rate by a quarter percentage point in December. The central bank telegraphed just one cut in 2026, but traders are currently expecting two quarter-point decreases this year, according to the CME FedWatch tool . However, the market may be misreading the Fed’s cuts this year, said Bloom, Invesco’s head of fixed income ETF strategy. “It’s hard to look at the macro numbers right now and say the Fed should be cutting,” he added. “The next move might be a hike, and so whichever way you lean on that, it probably behooves you to be balanced and sort of hedge.” With that in mind, he calls floating-rate investment-grade bonds and floating-rate bank loans a “tremendous opportunity.” Bank loans are senior secured in the capital structure, so they sit higher than high-yield bonds in the event of a default, he said. Plus, corporate balance sheets are in pretty good shape. The Invesco Senior Loan ETF (BKLN) has a 30-day SEC yield of 5.9% and a 0.65% net expense ratio. BKLN 1Y mountain Invesco Senior Loan ETF one-year performance Floating rate assets are typically in high demand when people are trying to hedge against rising short-term rates, Bloom noted. “So valuations are attractive there, yields are pretty attractive there,” he said. “We think there’s room for upside if the economy continues to strengthen and the market begins to price out Fed rate cuts later this year.” Bloom also sees opportunities in emerging-market bonds, since the U.S. dollar has been in a weakening trend . “There’s no more powerful macro stimulus for EM than a falling dollar,” he said. “Most of those companies, if they’re borrowing, they’re borrowing in dollars … as are their governments.” Bloom’s focus on emerging markets excludes China. For investors in the higher tax brackets, municipal bonds offer high-quality exposure and a nice pickup over Treasurys on the taxable-equivalent yield for the same duration risk, he said. The 10-year Treasury yield is about 4.21%, while the taxable-equivalent yield on a longer-duration muni ETF is 6.16%, Bloom said. Those who want to own longer-term investment grade corporates should plan to hold to maturity, he added. One thing investors shouldn’t necessarily do is stick with just a fund that is tied to the Bloomberg U.S. Aggregate Bond Index, which is heavily weighted in Treasurys, he noted. Diversification is key, and can be found by adding some floating-rate strategies, high yield, munis and international bonds, he said. “Staying away from Treasury overweights … will grab you a lot more return in fixed income,” Bloom said. A core plus bond is one way to add that extra diversification, he said.
