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Income opportunities in surprising places

Key takeaways

  • Bonds and dividend-paying stocks issued by Canadian companies, convertible bonds, high-yield bonds, and bank loans are among the income investments that may offer opportunities in the second quarter of 2025.
  • In the US, income seekers might consider convertible bonds, high-yield bonds, and bank loans.
  • Professional investment managers have the research resources and investment expertise to help identify opportunities and manage the risks associated with these investments.

Countries who depend on exports and face potential big tariff increases might not be the first places most investors would look for income-producing investments. So why does a veteran Fidelity portfolio manager believe that Canadian bonds and dividend-paying stocks may offer the most attractive income opportunities available in the second quarter of 2025?

Adam Kramer manages Fidelity® Multi-­Asset Income Fund (). He invests in a wide variety of income-yielding assets and seeks returns that are comparable to what stocks have historically delivered, but with lower volatility than stocks. He pursues this by looking for high-quality assets whose prices have been temporarily pushed down by investors overreacting to short-term bad news that obscures their attractive yields.

Kramer believes that is exactly what has happened to dividend-paying stocks and bonds of Canadian utility, pipeline, and other companies right now, and that’s pushing their prices down and their yields up. "Many bonds and fixed-to-floating preferred stocks of Canadian pipelines, utilities, and select high-quality banks currently offer attractive yields for reasonable duration," he says.

Of course, low prices and high yields can also be a sign that a company is in serious financial trouble and a bad risk for investors, but Kramer says that’s not always true. Instead, he believes many low-priced, high-yielding Canadian assets now may have much brighter prospects than they did even a few months ago.

Over the past 3 decades, Canada’s economy has become increasingly dependent on the export of natural resources and manufactured goods such as cars to the US. More recently, it’s also become much less able to grow and compete globally.

Now, Kramer believes the changing relationship with the US leaves Canada’s government with no choice but to reform its economy, cut taxes, and become more competitive in order to seek new markets for its exports. He believes that a political consensus is emerging that favors reforms that could eventually restart economic growth and raise asset prices. He says that Canada may have been in recession even before the tariff threat appeared and has been "starved for investment and capital spending," so he believes even modest reforms could have the potential to yield attractive results. “All you need is a little bit of a difference, of things going from horrendous to a little better to really make a difference in valuations and the sentiment, because there's been so much bad news,” he says.

To be sure, Kramer, a Montreal native, recognizes the disruption that tariffs could pose to Canadians and is trying to find areas that have been punished by fears of tariffs, but which may not in fact be exposed to them.

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Income opportunities elsewhere in the Americas

Kramer has also seen income opportunities in the US, including convertible bonds, high-yield bonds, and bank loans.

Convertible bonds can provide an alternative way for investors to access other companies or investment themes without buying their stocks and while also collecting a coupon.

Kramer also likes high-yield bonds. “These are short-duration, high-yielding bonds from companies with low levels of debt.”

“I also like bank loans because I have been able to get attractive yields with duration of less than 1 year, but I want to focus on those that really have high coupon yields."

Kramer also sees opportunity in some emerging-market bonds such as local currency Brazil sovereign bonds and US dollar-denominated Mexican oil company bonds. "In the case of Brazil, the central bank has regained some credibility, and the next catalyst could be the 2026 election," he says.

How and why to seek these less-familiar income opportunities

The reason for seeking opportunity in these less-familiar income investments is because these investments may deliver higher potential yields than more familiar stocks or investment-grade corporate bonds and they may also be available to purchase at discount prices. "Market conditions constantly change and the investments that deliver the highest returns today may not be the ones that do so next month or next year," says Kramer. "For a long time it was stocks, stocks, stocks. This year, though, I believe the best-performing asset class is likely to be something other than stocks."

Go pro

Professional management and research can help you manage the risks that come from venturing into less-common income investments. Investors may want to consider gaining exposure to multi-asset income strategies as ways to diversify away some of the risks posed by having concentrated exposure to a single asset class. You can do this by researching professionally managed mutual funds and running screens for these products using the Mutual Fund EvaluatorETF/ETP Screener on Fidelity.com. Below are the results of some illustrative mutual fund screens that invest in multi-asset income strategies (these are not recommendations of Adam Kramer or Fidelity).

Mutual funds

Fidelity® Multi-Asset Income Fund ()

BlackRock Multi-Asset Income Portfolio ()

Invesco Multi-Asset Income Fund ()

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The views expressed are as of the date indicated and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author, as applicable, and not necessarily those of Fidelity Investments. The third-party contributors are not employed by Fidelity but are compensated for their services.

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In general, the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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High-yield/non-investment-grade bonds involve greater price volatility and risk of default than investment-grade bonds.

Preferred securities are subject to interest rate risk. (As interest rates rise, preferred securities prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Preferred securities also have credit and default risks for both issuers and counterparties, liquidity risk, and, if callable, call risk. Dividend or interest payments on preferred securities may be variable, be suspended or deferred by the issuer at any time, and missed or deferred payments may not be paid at a future date. If payments are suspended or deferred by the issuer, the deferred income may still be taxable. See your tax advisor for more details. Most preferred securities have call features that allow the issuer to redeem the securities at its discretion on specified dates, as well as upon the occurrence of certain events. Other early redemption provisions may exist, which could affect yield. Certain preferred securities are convertible into common stock of the issuer; therefore, their market prices can be sensitive to changes in the value of the issuer's common stock. Some preferred securities are perpetual, meaning they have no stated maturity date. In the case of preferred securities with a stated maturity date, the issuer may, under certain circumstances, extend this date at its discretion. Extension of maturity date will delay final repayment on the securities. Before investing, please read the prospectus, which may be located on the SEC's EDGAR system, to understand the terms, conditions, and specific features of the security.

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