“Precision matters more than ever,” says fixed income ETF provider; points to opportunities in private credit, BB and CCC corporates, intermediate Treasuries and moreLARKSPUR, Calif., Dec. 11, 2025 (GLOBE NEWSWIRE) -- BondBloxx Investment Management, a provider of precision fixed income ETFs with over $6 billion in assets, today released its 2026 Fixed Income Market Outlook providing advisors and investors with insights and investment ideas for the year ahead. “With uncertainty and market volatility expecte ...

Core Insights - ETFs have achieved record inflows, surpassing $1.14 trillion in 2024 and projected to reach $1.4 trillion by the end of the year [1][2] - Despite various market headwinds, ETFs managed to achieve over $1 trillion in inflows for the second consecutive year, outpacing the previous year's performance [2][3] ETF Market Trends - The ETF industry is experiencing significant growth, driven by strong demand for equity and fixed income ETFs, as well as alternatives like gold and bitcoin [3] - Notable investment trends include increased international asset allocation, a resurgence in thematic investing, and heightened interest in various ETF sub-categories [3] Equity ETFs Performance - The Vanguard S&P 500 ETF (VOO) has crossed $100 billion in inflows for two consecutive years, solidifying its position as a leading equity ETF [4][5] - VOO's low fees (3 basis points) contribute to its attractiveness as a low-cost indexed fund provider [5] Fixed Income ETFs Performance - Fixed income ETFs have also seen record inflows, with $51 billion in October alone and over $350 billion overall for the year [6][8] - The demand for fixed income ETFs is driven by interest in municipal bonds, short-term funds, and active fixed income strategies [8]

Core Insights - The fixed income ETF market has seen significant inflows, surpassing $325 billion as of mid-October, indicating strong investor interest [1] - Market uncertainty is prevalent, particularly regarding interest rates, with a high probability of two rate cuts by the Fed before 2026 [2][3] - Municipal bonds (munis) are attracting investors due to their tax-free income and low default rates, making them an appealing option in the current market [4][5] Fixed Income Market Trends - The fixed income ETF market is experiencing record inflows, suggesting a shift in investor preferences [6][7] - Northern Trust's muni funds offer competitive expense ratios, with each fund priced at five basis points, which is significantly lower than the segment average [5] - The concept of "flippening" is introduced, predicting that fixed income ETFs will eventually surpass equity ETFs in assets over the next five to ten years [7] Municipal Bonds - Muni ETFs are benefiting from attractive yields and strong credit fundamentals, with federal tax-free income being a primary draw for investors [3][4] - Northern Trust offers three muni funds that cover the full yield curve, catering to different investment horizons [6] - The low default rates in the muni market further enhance their appeal to investors seeking stable returns [4]

Core Insights - September witnessed significant bond ETF inflows, totaling $39 billion, bringing year-to-date flows to $299 billion, nearing the all-time record of $303 billion set in 2024 [2] - All bond sectors experienced inflows, with the aggregate bond segment leading at 98% of total flows, driven by low-cost passive strategies and interest in actively managed bond ETFs [2] - Short- and intermediate-term government bond ETFs attracted 86% of September's inflows, indicating a consistent preference for these maturities over long-term bonds [3][4] Fixed Income Trends - Investor sentiment towards long-term government bonds remains cautious due to volatility and concerns regarding Fed independence and rising deficits, making intermediate bonds more appealing [4] - Target maturity ETFs also reflected a preference for shorter and intermediate maturities, with $1.6 billion in inflows, indicating a structural aversion to long-dated exposures [5] - Credit-related sectors saw $5.8 billion in net inflows, with year-to-date totals exceeding $50 billion, despite tight spreads in investment-grade and high-yield categories [6] Strategic Insights for Advisors - The data indicates that investors are repositioning rather than retreating, favoring short and intermediate fixed income, selective credit use for income, and real assets like gold for hedging [7] - The intermediate part of the bond market may provide the best yield and risk management balance, especially in a steepening but historically flat yield curve environment [8] - Investors are utilizing ETFs for tactical allocation and risk management, adapting to a changing economic landscape [9]

Market Overview - August was a surprisingly steady month for markets despite inflation concerns and trade tensions, with investors focusing on solid corporate earnings and potential Fed rate cuts [1] ETF Inflows - ETFs attracted a record-breaking $118 billion in net new assets in August, more than three times the historical average of $36 billion, indicating a shift in investor behavior towards liquidity and diversification [2] - A significant portion of ETF inflows was directed towards fixed income, with $13 billion into investment-grade corporate bond ETFs and $17 billion into active bond ETFs, marking the highest inflows on record [4][5] Fixed Income Trends - Fixed income ETFs saw elevated interest, particularly in investment-grade corporate bonds and short- to intermediate-duration government bonds, reflecting a preference for higher-quality debt instruments [3][5] - Inflation-linked bond ETFs attracted $1 billion in new flows, marking the eighth consecutive month of inflows, indicating persistent investor concerns about inflation [6] Gold ETFs - Gold ETFs experienced substantial inflows driven by renewed inflationary concerns and expectations of earlier-than-anticipated policy easing by central banks, reinforcing gold's status as an inflation hedge [7] U.S. Equities Valuation - U.S. equities faced valuation headwinds, with the S&P 500's earnings yield dropping to 3.7%, below the cash yield of 4.22% from short-term U.S. Treasuries, suggesting potential overvaluation [8][9] International Equities - Non-U.S. equities are yielding nearly twice as much as U.S. counterparts and have outperformed U.S. markets by nearly 10% YTD, the largest performance gap since 2009, driven by a weaker U.S. dollar and easing monetary policy abroad [10][11][12] Fed Policy Outlook - The Federal Reserve is at a critical juncture, with markets assigning an 88% probability of a rate cut at the next meeting, while September is historically the weakest month for equity performance [13][14] Investor Positioning - There is a discernible tilt towards cyclical sectors like industrials and technology, with growth-oriented equity strategies receiving twice the inflows of value-based strategies, indicating a renewed appetite for companies with strong earnings momentum [15]

Investment Rating - The report indicates a broad-based buying trend across various client groups and sectors, with a particular emphasis on institutional-led buying [1][11][19]. Core Insights - Financials experienced significant inflows, marking the fourth-largest since 2008 and the largest since February, with a notable increase in institutional client purchases [3][11][14]. - Clients showed a preference for growth over value, particularly in the technology sector, which outperformed most other sectors [3][11]. - The report highlights a shift in client behavior, with private clients becoming net buyers for the fifth consecutive week, contrasting with institutional clients who have been net sellers post-crisis [9][19]. Summary by Relevant Sections Client Flows - Institutional clients were the biggest net sellers post-crisis, while private clients have recently turned net buyers [7][9]. - Hedge funds showed small net buying activity after a previous selling trend, while corporate buybacks have slightly accelerated but remain below typical seasonal levels [11][19]. Sector Performance - Financials saw the largest inflows, followed by Health Care, Industrials, and Energy, while Communication Services experienced the largest outflows [11][16]. - Cyclicals recorded their biggest weekly inflows since January 2019, indicating a strong interest in these sectors [11][14]. Market Capitalization - All market cap segments (large, mid, and small caps) saw inflows, with large caps leading the way [22][26]. - The report notes that clients sold equity ETFs for the first time in nine weeks, with outflows across various sectors, particularly in Staples and Real Estate [11][19]. ETF Trends - Technology ETFs had the strongest inflows, while Consumer Staples ETFs faced significant outflows [29][30]. - The report provides a detailed breakdown of ETF flows, indicating a preference for mid-cap and broad market ETFs over large and small-cap ETFs [32][34].

Investment Rating - The report upgrades the Energy sector to overweight amid record neglect and highlights potential benefits from provisions for domestic manufacturers in the tax bill [10][11][12]. Core Insights - Institutional clients have been the biggest net sellers of US equities, while private clients have returned to buying, marking a significant shift in client behavior [10][11][12]. - Energy stocks have seen the longest recent buying streak, with net buying for the last six weeks, contrasting with significant outflows in the Technology sector [10][11][12]. - The report notes that clients sold US equities for the first time in five weeks, primarily driven by institutional and hedge fund selling, while retail clients continued to buy [10][11][12]. Client Flow Trends - Institutional clients sold a net of $2.59 billion in equities last week, while private clients bought $0.84 billion [10][11][12]. - Hedge funds were net sellers for the first time in three weeks, with a total outflow of $1.48 billion [10][11][12]. - Retail clients have been net buyers in 24 of the past 25 weeks, indicating strong retail interest in equities [10][11][12]. Sector Performance - The Technology sector experienced the largest outflows, with net selling of $1.79 billion, while the Energy sector saw inflows of $0.32 billion [10][11][12]. - Health Care and Real Estate also faced significant selling pressure, while Communication Services ETFs recorded the biggest inflows [10][11][12]. ETF Trends - Clients sold equity ETFs for the first time in five weeks, with a notable shift from Blend/Growth ETFs to Value ETFs [10][11][12]. - Large-cap ETFs saw inflows, while Small/Mid-cap and Broad Market ETFs experienced outflows [10][11][12]. Market Capitalization Insights - Large-cap stocks saw significant outflows of $1.92 billion, while Small and Mid-cap stocks recorded inflows [10][11][12]. - The report indicates a trend where institutional clients are favoring Mid-caps over Large-caps [10][11][12].