The Bloomberg Real Yield segment opens with a focus on the Federal Reserve’s recent monetary policy moves, highlighting the Fed’s third consecutive rate cut this year despite growing dissent within the central bank. Chair Powell emphasized the difficult balancing act the Fed faces between its dual mandate of controlling inflation and supporting employment. While the base case is a pause in rate changes, further cuts could occur if labor market weakness or inflation improvements materialize. However, concerns remain about inflation’s stickiness and the labor market’s true strength, with markets showing tension between short-term and long-term interest rate expectations.

Guests from Richard Bernstein Advisors and J.P. Morgan Private Bank discuss the Fed’s outlook, with Alexander Wolf suggesting one more rate cut next year depending on data, particularly as some inflation is tariff-driven and labor market dynamics remain uncertain. Mike, the Deputy CIO at Richard Bernstein Advisors, expresses skepticism about the rationale for further cuts given tight credit spreads and healthy jobless claims, warning that cutting rates amid strong employment could fuel higher inflation. Both guests agree that the Fed’s independence remains intact despite political pressures, with reappointments of regional Fed presidents signaling stability.

The discussion then shifts to fixed income markets, where Alexander Wolf favors investment-grade bonds and corporate hybrids for their attractive yields and carry, while Mike prefers municipal bonds and agency mortgage-backed securities due to their government backing and better risk-return profiles. From a multi-asset perspective, Mike also sees upside potential in equities, reflecting a positive growth outlook. The segment underscores the nuanced views on where to allocate new money within fixed income amid evolving market conditions.

In the credit markets, the conversation highlights record issuance expected in 2026, driven by elevated maturities and increased debt-financed mergers and acquisitions, especially among technology hyperscalers financing AI expansion. Despite the surge in supply, credit quality remains high with strong cash flows, and demand from yield-seeking investors is expected to keep spreads relatively tight. BlackRock and Wells Fargo experts note that while spread widening may occur, it is likely to be short-lived and sector-specific rather than broad market disruption, with a focus on income and carry rather than total return from falling interest rates.

The program concludes with a preview of the upcoming week’s key economic events, including U.S. jobs data, retail sales, European and Japanese trade figures, central bank rate decisions, and major corporate earnings. The overall tone reflects cautious optimism about market resilience amid ongoing Fed policy adjustments and credit market dynamics, emphasizing the importance of monitoring data and maintaining a diversified approach to fixed income and credit investments in 2026.