With President Donald Trump returning to the White House, financial markets are bracing for heightened volatility over the next four years.
The renewed focus on trade tariffs and sanctions, contrasted with promises of business deregulation and lower taxes, has already caused sharp market fluctuations—swinging between optimism and uncertainty.
Complicating matters further is the U.S. Federal Reserve’s balancing act. A robust U.S. economy, coupled with persistent inflation concerns, has led the Fed to maintain interest rates at elevated levels for longer than most had anticipated. The ongoing debate over rate cuts in 2025 remains a key factor influencing investor sentiment.
Despite these challenges, opportunities remain—especially for income investors. This was a key theme at the FSMOne Invest Expo 2025, held on 18 January at the Suntec Convention and Exhibition Centre.
Here’s where industry experts see some of the most compelling income investment opportunities today.
Property = Stable Yields?
During the panel discussion “Finding Income Opportunities in a Rate Cut Cycle”, speakers from Manulife provided valuable insights into navigating the evolving investment landscape.
One key highlight was Manulife’s Global Multi-Asset Diversified Income Fund (GMADI), which employs a diverse mix of income-generating assets. Among them, income-producing properties play a crucial role in reducing overall portfolio volatility while enhancing returns.
Even in an environment where interest rate cuts are expected to be gradual, achieving consistent income yields of 7% to 8% remains a challenge. However, the GMADI fund continues to meet this target by tapping into a range of unique income-generating opportunities beyond traditional asset classes.
Preferred Securities For Income
Preferred securities are an attractive option for investors seeking higher income. They function as a hybrid of equities and bonds, offering fixed-income-like yields while retaining some characteristics of stocks.
In the event of a company’s bankruptcy, bondholders are first in line to be repaid, followed by preferred securities holders. This seniority in the capital structure makes preferreds a relatively safer income-generating instrument compared to common stocks.
Many investment-grade (IG) companies issue preferred securities, including major banks such as Bank of America in the U.S. and DBS and HSBC in Asia. Beyond the financial sector, companies like NextEra Energy—the world’s largest renewable energy developer—are also significant issuers of preferreds.
With compelling yields in the IG space, preferred securities offer an attractive yield premium, making them a valuable addition for income-focused investors.
How About Bonds?
Later at the FSMOne Invest Expo 2025, an insightful roundtable discussion titled “Hunting for Yields as Central Banks Cut Interest Rates?”, hosted by iFAST, took centre stage.
A panel of iFAST portfolio managers and research analysts shared their perspectives on the evolving bond market. They noted that while the Federal Reserve remains committed to its dual mandate of price stability and maximum employment, the “higher for longer” rate environment has persisted due to entrenched housing inflation and a resilient labour market.
The yield curve, which began normalising in late 2024, has seen its long end steepen over the past six months. This trend is expected to continue in 2025, presenting opportunities for bond investors.
In terms of investment positioning, the panel emphasised a preference for short-duration bonds, as short-term interest rates remain elevated and historically attractive. For instance, short-term corporate bonds are currently offering yields above 4%, compared to their 20-year average of below 3%—making them particularly compelling for income-focused investors.
Being Compensated Across Duration And Credit
The panel questioned whether investors are adequately compensated for taking on additional duration risk in the long-duration bond space.
For instance, purchasing a 10-year Treasury currently offers only an extra 40–50 basis points (bps) in yield compared to a 6-month Treasury. Given the increased duration risk, this may not be an attractive trade-off for many investors.
Overall, the panel stressed the importance of being highly selective when investing in bonds. A prudent approach involves closely tracking the yield curve and consistently comparing short-term versus long-term bond yields to identify the best opportunities.
Additionally, the panel favoured investment-grade (IG) bonds over high-yield (HY) bonds, as the current credit spread between the two remains relatively narrow. In other words, investors are not being sufficiently compensated for the additional credit risk of HY bonds. That said, opportunities still exist in the high-yield space, but investors must be particularly discerning in their selection.
Read Also: Where Are The Best Investment Opportunities In Asia Right Now?
Photo Credit: iStock/olya_steckel
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