How can investors find income

14 September 2026, 07:24 UTC Chief Investment Office GWM Investment Research

How can investors find income? UBS House View Briefcase Leslie Falconio, Head of Taxable Fixed Income Strategy, CIO Americas, UBS Financial Services Inc. (UBS FS); Frederick Mellors, Strategist, UBS Switzerland AG; Tom Nash, Strategist, UBS AG; Matthew Carter, Strategist, UBS AG London Branch

Key message New this week More hawkish comments from the Federal Reserve, together with US core consumer prices rose 0.3% month over stronger-than-expected US inflation and employment data, have month in August, compared with the 0.2% shifted interest-rate expectations. We now expect the Fed to raise consensus forecast, while headline inflation rates twice in 2026. While short- to medium-maturity government increased 0.4%. The strength was concentrated bonds can still offer appealing yield, we also believe investors should in services, with core services rising 0.3% and look to diversified income strategies, including selective exposure to services excluding energy and rents increasing higher-yielding income segments, and structured strategies. 0.5%. Markets subsequently moved to price a roughly 90% probability of a 25-basis-point rate increase at the Federal Reserve’s September

01 We expect higher-for-longer yields on more hawkish Fed commentary and firmer data. meeting, up from around 70% before the release, according to CME FedWatch data. • US job creation accelerated in August. Nonfarm payrolls increased by 162,000, compared with consensus expectations for 55,000. US One liner CPI and PPI data point to a core PCE print of around 0.3%, with services inflation persistent. While the case for government bonds outperforming cash has narrowed, we see value • We now expect the Fed to raise interest rates twice in 2026, by in diversifying income sources across credit, 25bps in both September and December, taking the federal funds equity income, and multi-asset approaches. target range from 3.50-3.75% to 4.00-4.25%.

• We also raised our forecasts for US Treasury yields: We believe 2- Did you know? year yields will trade at 4.25% by June 2027, 100bps higher than our previous forecast, and 10-year yields will trade at 4.5%, 40bps higher than our prior forecast. • We estimate a multi-asset income portfolio could offer an annual income of around

02 Quality bonds' outperformance versus cash now looks more finely balanced. 5-7% per year. Such a portfolio invests internationally and dynamically across cash, • If the Fed moves onto a hiking path, as we now expect, the relative bonds, equities, and derivatives, to achieve its advantage of short-duration bonds over cash would likely narrow. income target.

• Investors could still earn attractive income in short-duration bonds, Investment view but the potential for capital gains would be more limited and further upward repricing of the policy path could weigh on returns. As part of a diversified income strategy, investors can look at selective exposure to higher- 03 So, we see opportunities to diversify portfolio income. beta income segments like high yield and emerging market credit. Equity income and • We like select exposure to more growth-sensitive and higher- yield-generating structured investment strategies yielding bond-market segments such as emerging market credit, can further support diversified portfolio income. high yield, and subordinated debt. Amid geopolitical and sector- Investors should, however, be willing and able specific risks, investors should avoid overexposure to any single to bear the specific risks associated with options segment of the credit market. and structured investments. • We also believe equity income strategies, yield-generating structured investment strategies, and multi-asset income approaches can help broaden income sources and support investors’ income objectives.

This report has been prepared by UBS Financial Services Inc. (UBS FS) and UBS Switzerland AG and UBS AG London Branch. Please see important disclaimers and disclosures that begin on page 3.

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