Core Viewpoint - Fidelity's bond ETF lineup, while smaller than some competitors, offers strategic options for investors looking to capitalize on the improved bond market environment heading into 2026 [1][3]. Group 1: Bond Market Environment - The fixed income market has seen a resurgence, with yields of 4% or greater available across various points on the yield curve, and inflation is now contained, allowing for a more favorable investment climate [2]. - The bond market is recovering from a challenging period, including a poor performance in 2022, and is now positioned to be a more integral part of traditional asset allocation strategies [1][2]. Group 2: Fidelity's Bond ETFs - Fidelity currently offers 13 bond ETFs, providing a range of options for investors to navigate the current economic landscape [3]. - The Fidelity Total Bond ETF (FBND) provides broad exposure to the total bond market, including both investment-grade and junk bonds, with minimal exposure to non-investment-grade and non-U.S. bonds [5][6]. - The Fidelity Enhanced Yield ETF (FDHY) focuses on the junk bond sector, employing a factor-based approach to select bonds with optimal value and quality characteristics, which may benefit from a healthy U.S. economy and stable credit spreads [10][11]. - The Fidelity Tactical Bond ETF (FTBD) combines features of both FBND and FDHY, covering all areas of the fixed-income market while allowing for tactical rotation based on valuation and quality assessments [12][13]. Group 3: Future Outlook - The bond market in 2026 is expected to be influenced by various economic factors, including growth, inflation, and labor market conditions, making a strategic approach to fixed income essential [7]. - Active management in bond funds is anticipated to yield better results as central banks approach the end of their rate-cutting cycles, shifting the focus from yield capture to security selection [14].

Last month saw the Federal Reserve cut interest rates for the second time, with capital markets prognosticating on just how aggressive the central bank will be in 2026. This uncertainty could cause investors to wonder how to extract income in this rate-cutting cycle. The answer could be left to the experts using an actively managed ETF: the Fidelity Tactical Bond ETF (FTBD). While the goal of FTBD is practical — to seek a high level of income — its methodology is tactical. The fund positions investors in a ...