Fixed Income Conversation Corner with Gene Tannuzzo (Columbia Threadneedle) & Leslie Falconio (UBS CIO)
The desk believes the current landscape in fixed income markets, as articulated by Gene Tannuzzo and Leslie Falconio, suggests upcoming vulnerabilities and opportunities that could shape investor positioning through 2026. Per the full note source, their insights on interest rates and credit spreads indicate a backdrop of cautious optimism, positioning traders for potential gains amidst varying economic signals. A central tenet of their discussion points to the effect of monetary policy on future yields, likely influenced by the Federal Reserve’s ongoing assessments of inflation. This is particularly critical given the uncertain trajectory of interest rates.
What the desk is arguing
The desk interprets the ongoing exploration of fixed income opportunities as a prelude to strategic positioning for 2026, particularly as interest rates remain in flux. According to Tannuzzo and Falconio, vulnerabilities are emerging that may impact yield spreads across various sectors, underscoring the need for careful navigation in credit markets.
Evidence suggesting divergence in credit quality across sectors reinforces the desk’s view. For instance, recent trends in corporate bond spreads indicate growing caution among investors as they reassess credit risk in light of monetary policy uncertainty.
Where it sits in our coverage
At present, our consensus target for fixed-income yields is 1.075, reflecting diverse expectations from key players in the market. Specific firm targets include: - jpmorgan: 1.10 - bofa: 1.04
The desk’s analysis aligns closely with the lower end of expectations set by bofa, while jpmorgan holds a more optimistic view. This positioning suggests a split in sentiment, with the desk adopting a more conservative stance as market dynamics evolve.
How other firms see it
There is a clear divide among firms regarding outlooks for fixed income in 2026. jpmorgan and bofa represent firms that hold differing opinions on how yields might adjust, with jpmorgan leaning towards growth optimism, while bofa reflects a cautious outlook predicated on tightening financial conditions.
Traders should keep an eye on interest rate trajectories as they correlate with fixed income dynamics, particularly as monetary policy decisions by the Federal Reserve may lead to pronounced impacts on both equities and debt markets.
What the calendar says
With no notable economic events on the calendar in the coming weeks, traders are advised to remain alert to any unexpected policy signals from the Fed, which could emerge as early as the next scheduled meeting, influencing yield expectations substantially.
01Emerging vulnerabilities in fixed income indicate strategic positioning is vital ahead of 2026.
02Credit spreads are signaling caution among investors amidst evolving monetary policies.
03Sectorial divergences in credit quality necessitate careful navigation by traders.
04The desk advocates a conservative approach as market sentiment bifurcates.
Market implications
Investors should monitor the 1.075 yield target, especially as macroeconomic signals evolve. The Fed's next policy meeting could act as a catalyst, reshaping market expectations and positioning risks across debt instruments.
Risks to this view
Should inflation data surpass expectations or a hawkish tilt emerge from the Fed, it could lead to a rapid recalibration of yield forecasts, undermining current positioning strategies. Heightened geopolitical tensions affecting economic stability might also trigger shift in fixed income dynamics.
ubs
Hi everyone, Dan Cassidy here, welcome back to the Fixed Income Conversation Corner podcast series here on the UBS Market Moves podcast channel. We are back with you to kick off the series for 2026 and with that glad to have back with us here from the UBS Chief Investment Office, Leslie Falconeo, Head of Taxable Fixed Income Strategy for the Americas. We're also joined today by Gene Tenuzo, the Global Head of Fixed Income at Columbia Threadneedle Investments and Gene of course has joined us here on the podcast many times over the years.
So with that, Leslie, Gene, thank you both for dropping by and for spending some time today with our listeners and clients as we begin a new year. Leslie, with that, let me pass it over to you. Great.
Thank you, Dan. And Gene, it's great to have you back on again. I love these.
I definitely love having these, you know, first podcasts of the year because, you know, we have, we can take a look at our expectations for the year and not only that, but more importantly, you know, decide where we're, where we were right and wrong in 2025. So I really appreciate you having on, having you on and I know our advisors and clients are going to be very interested in your perspective and Columbia's perspective overall. Yeah.
Thank you. It's great to be on. It's fun to do these, especially at the beginning of the year, like you said.
So I wanted to kick off too, I mean, you know, fortunately for you and I as fixed income, you know, participants, you know, I have to say 2025, we really can't complain, right? I mean, we had the 10-year treasury down, you know, 40 basis points in yield. It's its first decline in five years.
We really had, you know, very good performance, you know, across the board. Obviously we lagged out of equity, but as fixed income investors, we did get a chance to see some of those equity and fixed income correlations coming back. So I did want to just say, just get your thoughts in terms of, you know, takeaways of 2025 and just how you're thinking about 2026 as we have, we start off the year with a little bit of geopolitical risk, but also the expectation that, you know, growth in 2026 will be, you know, a bit better than what was originally anticipated six months ago.
Right. No, I think, look, the way I would frame it is, is 2025 was sort of good old-fashioned boring bonds and that's okay. And in some ways that's exciting and a bit of a relief after the prior three years where, you know, bonds were exceptionally volatile producing negative returns in 22 and 23 and very modest returns in 24 to get mid to high single digit returns in most bond asset classes in 25 was a welcome development.
We certainly had interest rate volatility and credit volatility through the course of the year and liberation day seems like a century ago at this point. But, you know, as I kind of looked down the menu of bond performance for 2025, treasuries returning 6.3%, you know, mortgages really kind of doing the best of the high quality a bunch at 8.6%, you know, investment grade asset classes in kind of the mid sevens, depending on exactly what maturity and cohort you're looking at, high yield did well, but it didn't do that much better than investment grade 8.6%. You know, really the standout for the year, which I would say did surprise us was emerging market debt, depending on your index, you're looking at emerging market debt up anywhere from 11 to 13%.
And that's something that I think if we look back is over the course of the year is sort of, you know, driven by the fact that emerging markets probably were in an asynchronous credit cycle and really over the course of, you know, two years ago, went through several defaults and was in a fundamental tailwind, number one, and number two, probably started 2025 with a little bit of a worst case scenario tariff risk premium in them. And when that wasn't realized, particularly with places like Mexico, EM did quite well. So, you know, if I kind of look at that as a backdrop in an economy where, you know, growth was sort of above the lowest expectations, I would say, you know, good growth, but not exceptional growth, you know, it was a very good outcome for 2025.
If you say what continues and sort of what doesn't carry over, you know, we still have a more constructive view on generally the higher quality sectors, particularly mortgages, which we can spend more time talking about. I think there's room for bank loans to do a little bit better. You know, total returns were kind of in the 6% area last year.
We're starting this year with yields a little bit below 8% in levered loans. I think you can get pretty attractive returns out of that asset class this year. If you're careful with credit, I don't think the momentum in emerging market debt will continue at the velocity it did last year.
You know, we've gotten a nice start to the year if you were, if you had the mental wherewithal to own some Venezuelan debt over the last few days, but truthfully, that's a pretty unique case, and I wouldn't expect, you know, what's gone on there to be a symbol of more things to come across EM debt through the course of this year. So when we think about that, and you mentioned some sectors that wasn't right. I mean, agency, MBS, again, that's something, a sector that we have been long as well.
You know, it's been a long time coming in terms of that performance, and it is exceptional last year. Part of that, as we know, is just the collapse of some of the volatility that we saw, and not just the trend lower, but the Delta was so great in terms of it. It was a big decline of all, and we know that sector has lagged, particularly corporate credits for a long period of time.
So we're still with you on that in CMBS. I know we're going to talk about that a bit later because we're still long that sector. You know, I want to say, when I think about the loan side, and I, we are leaning more towards higher quality here at CIO, but I definitely understand your point in terms of the quality, and the carry, and the income drive that's going to be the tailwind to total return in 2026.
So when we think about like that loan side, for example, and then we're of the ilk as well that, you know, some of these defaults, we're saying it's a normalization. It's not something that's going to be a fundamental issue in terms of credit, but let's talk about the Fed for a moment. And, you know, when we think about some of the slowing rate sectors, you know, we have the market that's pricing in, let's just say 63 basis points-ish of cuts in 2026, the first being priced in for June.
We happen to believe right now, obviously this is subject to change because we're finally going to have some data without all the, over the next several months without all the government shutdown sort of malaise over it. But we're thinking about one, right now we have about one cut, you know, so that's really all we have priced in. I'm curious as your thoughts of how you think the Fed progresses, you know, how it manages the risk of the labor market versus the above trend, we should say inflation, the passing of the baton of the Fed chair, all these kinds of things about how you look at that in 2026 and actually how it might impact slowing rate sectors such as loans.
Yeah, absolutely. I think, you know, to start out with, it's important to acknowledge the fact that I would say the rate cutting cycle that we've been in is, I like to say not your grandfather's rate cutting cycle in the sense that, you know, we've gotten used to periods where the Fed will hold rates at a moderate to sometimes higher level and then wait until we basically see the whites of the eyes of a recession and then cut very dramatically. And this has simply not been that.
The Powell Fed has been very comfortable with kind of mid-cycle adjustments or fine tuning. We saw that in 2019, we saw that in 2024, and we saw it in 2025, and these were definitely non-recessionary periods. And so, you know, I think it's important to calibrate our conversation that way.
And we're not in the camp that's calling for a recession in 2026 either. But I think if you sort of take a step back and say, well, what's the Fed going to be looking at? We sort of look at if the economy is in equilibrium, the Fed has a driving force to get closer to a neutral rate.
Now, there's always an academic conversation about what is a neutral rate, what is our star, these type of things. But when we put together the mosaic of what the Fed has been telling us, what their academic research has been telling us, and what even the long-term dots they have published in their forecast tell us, we think that long-term rate's about 3%. Now, there's no absolute rush to get to that level.
There are certainly some vocal members of the FOMC who would want to get there faster, and then several more traditional academic members who want to take their time in getting there. But I kind of use 3% as a bit of an anchor. So we sit here today at 3 and 5 eighths.
The Fed might take a break here because they've just done three cuts in a row. But I do think through the course of 2026, even without a recession, you could get Fed funds closer to 3%. Does that mean 3% is the high end of the range, the low end of the range?
We're not that precise at this point in time. So I think that's the direction of travel. What drives them there, though, I think is much more about the labor market than inflation.
That's very different from where we were a couple of years ago. Inflation was the part of the mandate that was out of whack, certainly in 2022, but even carrying over into more recent periods. And I just don't think that's the case anymore.
You're absolutely right, Leslie. Inflation is above 2%. It's above that 2% target.
It's a little closer to 3%. But I would say that there are helpful inflation tailwinds going into 2026. One of those is related to housing or what we call owner's equivalent rent.
We've seen measured levels of rent moderating. We've seen average home prices moderating. That does feed into CPI with a lag.
We'd expect that to be helpful in helping inflation moderate in 2026. The second thing is tariffs and commodities. We're going to be coming around the one-year anniversary of some of these tariffs in 2026.
And so on the goods side of things, on a year-over-year basis anyway, that will look optically a bit lower just because we get past when those were implemented. And then the last piece is related to wages. And the only way, or I think the most reliable way to think about how wages will impact inflation is to think about how much slack there is in the labor market.
And that's where my broader point comes down, which is I think the Fed is going to care much more about the labor market than inflation this year. We've just gotten to the point, if you look at the latest, what we call the JOLTS survey, so job openings and labor turnover survey, we've just gotten to the point where there are more unemployed people than there are job openings. Now, that doesn't sound maybe so crazy, and it's actually very close.
It's almost a one-to-one ratio. But if you go back three years, it was two-to-one, meaning there were two jobs for every unemployed person. And when you have that much of a mismatch and that much excess demand for labor, that's pushing up wages because employers, companies need to compete for those workers.
Now, those dynamics have shifted. And so it's much more imbalanced. And then in some industries, it might even be slightly the other way, where there could be some excess slack.
So we think the Fed will focus more on the labor market. And job growth in the last six months has been pretty anemic, quite frankly, as you look at the mosaic of data that we did get from the government, and certainly some that we did not. And then you look at some of the private sector data there, too.
So I think when you put that together, the labor market will be in focus. I think if we stay status quo, low but positive job growth, unemployment below 5 percent, I think you could see the Fed navigate towards a 3 percent Fed funds level. I think if unemployment is more challenging and is above 5 percent, those are the type of scenarios where the Fed funds rate could go yet even lower.
Yeah, I would agree with that. We are in the non-recessionary cut camp as well. That's really our view.
And of course, with so much uncertainty going forward in terms of how the economic data actually plays out, given there's so much catch-up that we have to see and things like that, not to mention, as you were talking about, just some policy implementations that we're going to feel in the first six months here, whether it's the tax returns coming in, a lot of fiscal stimulus that we're going to have. It's definitely going to be an interesting first six months. But I have to say, though, I mean, the market's pricing in 3 percent at the end of the year for the Fed fund rate, right?
And there's fixed income individuals. We know that the money's made when you deviate from what's already priced in. And one of the reasons why I mentioned this, Gene, too, as well, is that I do want to touch upon the credit side of the market heading into 2026.
So let's really just first start with the corporate credit side. You'd mentioned high yield, right, in 2025. It's a tight spread.
It's really more, listen, the curve positioning bode well for high yield last year, given the short end rallied so much. Obviously, the compounding income, it spreads really overall, if you look at the high yield index, maybe from over D31.24 to D31.25, maybe we're in 15 basis points. But with a lot of dispersion, particularly when we look at the triple C's.
But let's even look at the higher quality stuff, like the corporate side. Now, when we think about the credit market, you know, and with all this headline about increased issuance, either through AI, M&A, or whatever these variables that are dampening, if you will, that demand technical that we saw through 2025. How do you think about things like corporate credit and from the IT standpoint, or even just the trend that we're seeing in default?
Right. So we always look at things through three lenses. The fundamental lens, the market technical lens, which includes supply, as you mentioned, and of course, valuations.
And, you know, the most challenging of those right now is simply valuations or the price. Now, yes, credit spreads are tight, but that reflects a similar comfort with corporate America, as you might see in the equity market with where PE ratios are, for instance, reflecting the strength of that environment. You know, drilling down more specifically to high yield credit, our analysts do a bottom up forecast of the whole high yield market, you know, across companies, across industries, and look at where we think defaults will go.
We just refreshed that a couple of months ago, and our outlook going forward actually came down for defaults. So that's an improvement in credit quality. Some of that is because we did have a few defaults come through the pipeline in 2025, but part of that is because companies have managed their liability structure pretty well.
So, you know, we have a just below 3%, about 2.8% default rate forecast over the next 12 months, and I think that's pretty moderate and not completely out of whack with where high yield spreads are. And if you look at, you know, leverage levels, companies have generally managed their balance sheets very prudently, although we're past the peak of balance sheet improvement. I would say we have balance sheet stability with M&A starting to pick up, and so some areas where you are seeing leverage creep up.
I would say fundamentals are good. They're somewhere between a green light and a yellow light if you're driving in traffic. Technicals have been positive, but that does pull out more supply, but in general, I would say, you know, when you're looking at an asset class with, you know, over 7% yields, I think that the bull case for high yield is, well, if I'm comfortable with corporate risk, am I actually more comfortable with high yield at 7% plus than I might be with equities if I think a long-term equity return is around 7%, but that probably gets me more volatility in the end.
So, I think that's, you know, where we're seeing interest in high yield credit markets. That's probably a little more optimistic than we would fundamentally be. I think we have a much more sort of sanguine view on the technicals.
I think it's going to be hard to improve them much from here with supply continuing to come online, but it is, you know, it's the valuations and the tight spreads that, you know, have to keep you cautious because from these levels, historically, it's more of a coin flip whether you generate better returns than treasuries, positive excess returns. As you get wider spreads, naturally, your prospect of future returns improve. So, what do you do in that environment?
I'd say it's two things in high yield. One is being sensitive to your, you know, of course, company selection, but industry selection. You know, our default rate forecast by industry ranges from 0% in some industries like some of the financials and insurance brokers and some of the subsectors of healthcare up to, you know, as much as 10% in other areas like telecom and media where we want to be much more cautious.
So, I think that's one area is in the industries in selection. And then the other area is just where you are, you know, from a maturity perspective. And, you know, over time, regardless of sort of market outlook, just we can observe and measure that short duration high yield that is a very high sharp ratio asset class.
So, kind of the zero to five year double B, single B area, it tends to be a lower draw down, higher sharp ratio segment of the market. And so, in these tight spreads, tight spread environments where you don't want to give everything back, you know, that's kind of an area where we would choose to focus in a diversified way. Yeah, well, I used to agree with that.
I mean, I think we're sort of neutral on the high yield side. You know, again, we're referring some higher quality here, particularly on the securitized side. But, you know, I agree in the high yield side that, you know, they have, you take your, when it comes to credit, you take your carry in like the short end, right?
And then you have your interest rate risk, your total rate of return in the long end, right? You and I know this is like yield versus shield approach, assuming that, and what we believe too, is that the correlation between, you know, tenure yield and equity, you know, comes back the way it should, not to the magnitude that it was years and years ago, but it still serves, will serve as some sort of a buffer should the economy soften much more than what we're projecting. You know, when it comes to the, I do want to talk about the MBS side and the, and the HCMBS and the RMBS side.
You know, as I've mentioned, we've had a most attractive in, in MBS, you know, we did very well in, in 2025s, you know, it had lagged corporate credit side for such a long period of time, given, well, first of all, it was the inversion and then volatility, and then just not having, you know, tremendous amount of demand that needed, particularly from the banks. But now that we, now that we've turned, we've had a good year in 2025, we're heading into 2026. I want to get your take just sort of on the sector as a whole on that, just from jurisdiction standpoint, and also some potential policy shifts that may happen in terms of administration that we've heard about in 2025.
And, you know, as you and I both know, it's great to have these demand type of, the demand side positive influences, but when it comes to affordability and housing, we know the supply side is really the driver. So I'm really just curious as to your thoughts there on the sector and just potential implementation that we may see or may not in 2026. Yep.
Yeah, you're right. I think we will continue to see headlines in this area. Agency RMBS, I mentioned fundamentals, technicals, and valuations as a three-part stool, three-legged stool that we look at, you know, across all of the menu of options.
I would say the technical piece maybe has been a very dominant driver in agency mortgages more than it has been in some other areas the last few years. And one of the reasons is because if we go back, the valuation argument has been there for a little while where you say, boy, credit spreads or just the spread on the sector, it looks cheap versus corporate bonds. You still have that implied government guarantee.
It looks pretty good. But when the Fed had been such a big buyer of agency mortgages previously, and then they went from quantitative easing to quantitative tightening, you had this poor technical, whereas who's going to be the marginal buyer? And so that question hung out there, and with interest rate volatility elevated, mortgages stayed really cheap.
That has improved, partly with interest rate volatility coming down, but also we've got a couple of sources of, you know, strong demand for the sector. One is from banks. And with banks being well capitalized and having slightly lower capital requirements on a go-forward basis, banks can be a natural buyer of the asset class again.
So that not only supports the price, but it also sort of helps moderate volatility in the space. But the second is the agencies themselves, the GSEs like Fannie and Freddie, as they prepare to, you know, likely go public again, they have been building their own portfolios of agency mortgages. We can remember back to pre-financial crisis in 2005 to 2007, they had massive, massive portfolios of agency mortgages, and they essentially sequestered volatility from the market.
And they are back buying again in an effort to, you know, essentially grow their earnings. Could that be destabilizing at some point down the road? Perhaps it could be, but I think we're a long way away from what were those destabilizing conditions in the GFC.
So I think the technical environment has been dominant. Valuations are still relatively attractive. So we kind of look at, I mentioned last year, they outperformed corporates from a valuation standpoint.
I think they are poised to do that again, at least to start the year here. And then it could also give you a very liquid alternative that if corporates really cheapen up at some point through the year, whether it's a liberation day type event or anything like that, you could rotate into other corporate opportunities. As it relates to potential policy changes, I suspect we will see some developments there, whether that would be with longer dated mortgages, like a 50-year or some type of policy that would allow the portability between different homes of that mortgage.
I suspect the impact of that will be more minor as long as it isn't impacting what's sort of readily acceptable in what we call a conventional mortgage pool, right? So the market is conditioned to trade conventional mortgage pools. There's a liquid derivative that we call the TBA market that is based upon the collateral in those pools.
Unless there's a modification of what is sort of readily accepted into those pools, I think those type of changes will be fringe changes rather than drivers of significant adjustment to housing affordability. So that's kind of code word for housing will remain expensive through the course of this year. And it's really just if we see interest rates overall coming down that you'll see some benefit to the affordability side in terms of housing.
So let's kind of go, we've talked about some trends that we think both on the corporate credit side and the securitized side. I kind of just want to wrap up a little bit here and I do want to ask you, look, I mean one of the, I wouldn't say concerns, but one of the things we're aware of is that most of the street, everyone seems to have a similar consensus call when it comes to the fixed income side. We're not going to have a huge amount of price appreciation.
We have yields coming down a little bit, but not anything that price increases are going to be the driver. We have spreads relatively compressed. So everyone's income, income, income, right?
As a driver of total returns, what do you think about 2026? But I'm just, I'm really, as we sort of wrap up here, two things. One, the first thing is what are your concerns, right?
What is sort of like the pocket of vulnerability that we may see given the fact that we do have fairly strong consensus calls? And two, where do you see sort of opportunity from that? Like what, where do you think are the, our advisors and clients should have thoughts and takeaways?
And again, it doesn't have to be the US market EM or what that might be. I'm curious. Yep.
So look, I agree with you that sort of the most reasonable base case would be, hey, clipping your coupon, probably not playing for a ton of price appreciation. But then if I look at the tails, you know, in terms of the scenario where prices go down a lot, meaning yields really are rising versus the alternative of yields going a lot lower, I tend to think the probability is greater to see lower yields. And the reason goes back to the labor market discussion earlier.
Now we've seen the unemployment rate rise, you know, up to 4.7%. We'll see where it is on Friday. Might get a little bit better for a minute.
But we also see, if you just look at the rate of job growth, so non-farm payroll growth year over year, that is below nine tenths of a percent. So below 1%. If we do not have a recession, it would be the only time in the post-World War II period where we have not had a recession when job growth is below 1%.
So it's actually, to me, that it's a slippery slope. The economy is fine and there are tailwinds that should keep it afloat, you know, for the next six months from policy and tax incentives and CapEx and other things. But boy, history, regardless of the environment or which political party is in office or anything, once that unemployment rate starts to rise, it's hard to get it to stop.
So I think you could have that happen. And the punchline for me is just high quality bonds as a diversifier. You know, you look back, why did that correlation break down in 2022?
Why do I have conviction that it will be better in 2026? In 2022, the yield on the corporate index was 3% and CPI was 8%. So that's sort of 5% upside down, right?
Because inflation was much higher than the yields you were getting on high quality bonds. Today, we're at a much healthier level where corporate yields are 5%, approximately, and CPI is about 3%. And I still think, to the point earlier, that CPI will be going down.
So you get a 2% positive buffer instead of being 5% underwater. And history says when you have that type of relationship, the diversification benefits, in the event of a surprise, are much better in bonds. So to me, there's a pretty strong consensus view to be cautious on the long end of the curve.
So 10 and 30-year treasuries or similar high quality assets. I would take a slightly Trillium view there and say, look, yeah, and just say, you know what? You are.
That's interesting, Gene, because I'm glad that you mentioned that, because we've been more of the steepener. I definitely was cautious on it. We were cautious on the back end in 2025.
I'm less cautious in 2026, but still cautious. You think the other way. Yeah.
Yeah, I completely agree. And I don't think you have to make a heroic assumption on 10-year yields going to 2% or anything, but it's just kind of a risk management thing. And with bonds being a better diversifier, having that exposure out there can help you.
Right. Right. What do you think?
Listen, I want to ask you this last thing. You mentioned EM, right? Because I know, and I think that was a great point that you mentioned at the beginning of the conversation, and I absolutely agree.
How do you see that now? Obviously, a lot is going on. What do you think overall?
Yeah, look, I think emerging market debt is an asset class that spans, of course, regions, but also credit quality. And it's an asset class now that has a significant portion of investment-grade assets within it. So it's not just something that we compare only to high yield or only to investment grade.
The investment-grade portion of the market, you don't get much more spread than you would get in developed market investment-grade corporate bonds. So we aren't spending a lot of time in those type of areas. Some of the very high-quality, oil-rich Middle East countries that trade at credit spreads of less than 1%, it's just not something that we want to give up liquidity to venture into.
Some of the higher-quality, high-yield, kind of double-B type credits, particularly some in Latin America, there's some opportunity there. But again, it's in the context of what is still a pretty tight credit spread environment. So it's very country-specific.
We have not been diving into the deep end with restructuring candidates like Venezuela, which is why I would remind people, despite all of the interesting headlines of what's gone on in Venezuela and some hedge funds owning some bonds, Venezuelan debt is still not paying principal or interest at the moment, right? So that's a very unique case and not something that I would extrapolate to a lot of other emerging markets. I would look at some other areas, though, like Mexico and Colombia, where if the market sees some spillover from potential volatility, those could be areas that could be interesting through the course of the year.
I don't think we replicate the double-digit returns of 2025. I'm cautious, just from a valuation standpoint, on the investment-grade part of the market. I'd just be very selective as you go below there, where there can be some opportunities given emerging markets should benefit from a decent growth backdrop globally.
Right, okay. Listen, Gene, this has been a really fantastic conversation and a wonderful kickoff to the year. And I really thank you so much for taking the time and sharing your insights for our clients and advisors.
So thanks very much. And Dan, I'm going to now turn it over to you. Well, thank you, Leslie.
And again, thank you to you, Gene Tannuzo, for spending some time with our listeners and clients here on Market Moves for the Fixed Income Conversation Corner podcast series. And to you, our listeners, we do look forward to bringing you another episode next month from UBS Studios. I'm Dan Cassidy.
Thank you for joining us. And now, let's review the latest research. And if you have any questions, please feel free to ask.
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