Advisers and wealth managers believe geopolitical instability and energy price volatility are expected to pose the biggest risks to fixed income markets over the next 12 months, according to new research from Nedgroup Investments.
The survey found that 45% of financial advisers and wealth managers identified geopolitical shocks and energy price volatility as the greatest threat to fixed income.
This was closely followed by elevated government issuance, cited by 44% of respondents, while 42% pointed to persistent inflation and interest rate volatility.
Nedgroup Investments said fixed income markets have already been grappling with these pressures since the start of 2026, following the outbreak of the US-Iran war.
Central bank divergence and currency effects were identified as a risk by 38% of respondents, including differences in policy between the US Federal Reserve and European Central Bank.
Meanwhile 32% highlighted the risk of credit deterioration in a higher-for-longer rate environment. Almost a third, or 29%, were also concerned about heavy corporate bond issuance linked to AI-driven capital expenditure.
Despite the challenging backdrop, advisers and wealth managers also identified a number of potential opportunities in fixed income.
More than half (57%) said new issuance, including from high-quality corporates, could allow investors to pick up additional spread, while a further 55% said greater dispersion between sectors and issuers could create opportunities for active managers to generate alpha.
Short-duration and high-quality carry strategies were highlighted by 49% of respondents, while the same proportion said divergence between the Federal Reserve, European Central Bank and Bank of England could create opportunities through cross-market allocations.
Tom Caddick, managing director at Nedgroup Investments, said: “The fixed income market continues to navigate a highly complex backdrop, with advisers and wealth managers clearly recognising that geopolitical uncertainty, elevated government borrowing and persistent inflation remain the defining risks over the next 12 months.
“Recent events have reinforced how quickly market conditions can shift, making careful risk management and active management more important than ever.”
He added that increased issuance from high-quality corporates, alongside greater dispersion between sectors and issuers, could provide a stronger environment for active managers to add value.
“In periods like these, disciplined credit research and a selective approach to portfolio construction can help investors uncover attractive risk-adjusted returns while remaining resilient to ongoing market volatility."
