Case for buying bonds amid stock market volatility

Investors may want to consider bonds to help navigate the market’s recent volatility.

Joanna Gallegos, BondBloxx co-founder and CEO, recommends prioritizing income and high-yield bonds.

“It can be really important to start looking at fixed income as you start to diversify and manage more risk,” she told CNBC’s “ETF Edge” on Monday.

Gallegos also suggests moving out on the yield curve.

“Fixed income is very different today than it was two years ago,” she said. “We’re at the end of the great rate hike. So, rates are high, and that makes a lot of difference in a portfolio today than it did when we started out with rates being almost at zero.” 

PIMCO’s Jerome Schneider, who manages one of the biggest actively managed bond exchange-traded funds in the world, also advises investors to look toward bonds.

“They’re entering these market conditions with a generally underweight posture to fixed income,” the firm’s head of short-term portfolio management said. “What we’re seeing here is that there are better risk-adjusted returns by being an actively managed, fixed income diversified portfolio than there have been in many years.”

Schneider predicts the Federal Reserve will start cutting rates this year and warns money market funds will likely see yields ebb “pretty quickly.”

“Favoring the front part of the yield curve is a place that we think is … most attractive at this point in time,” Schneider said. “In the 2-, 3-, [and] 5-year spaces, there’s plenty of opportunities across diversified portfolios to look.”