After several years marked by the dominance of equity markets and interest rate volatility, 2026 could turn out to be more favorable for bonds. Without expecting a spectacular reversal, several economic and structural factors suggest that a relative catch-up of the bond market cannot be ruled out.
First, the high valuation of U.S. equities calls for caution. Indices such as the S&P 500 are at historically stretched technical levels after a long period of growth supported by liquidity and corporate earnings. In this context, a consolidation or profit-taking phase is not unlikely, and such an environment often leads investors to rebalance their exposure toward less risky assets, including bonds.
The U.S. presidential cycle could also play a role. 2026 is the second year of the presidential cycle, which historically tends to be the weakest for the S&P 500, possibly triggering a partial rotation of capital toward bonds, perceived as more stable.
On the macroeconomic front, the prospect of lower interest rates by central banks is another factor to watch. Given high debt levels and a potential weakening of the labor market, the Federal Reserve and the European Central Bank could adopt a looser monetary policy. A decline in rates would mechanically support the value of already issued bonds.
At the same time, the gradual normalization of inflation favors a more predictable environment for bond investors. In the coming months, the impact of tariffs will fade, and more moderate inflation would stabilize real yields and strengthen the appeal of fixed income.
Relative bond yields have also become competitive again compared to equities, as the S&P 500 earnings yield now stands below the 10-year U.S. Treasury yield. For institutional investors, especially pension funds and insurance companies, these levels offer an opportunity for prudent diversification—particularly if equity markets stabilize or correct.
Added to this are fiscal constraints in several developed economies, which could limit stimulus policies and encourage greater market prudence.
In short, without predicting a bond market rally, several factors—relative valuations, monetary policy, inflation, and the economic cycle—suggest that 2026 could mark a period of stronger relative performance for bonds.
Chart showing the monthly candlesticks of the 20-year U.S. bond contract:
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
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Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
First, the high valuation of U.S. equities calls for caution. Indices such as the S&P 500 are at historically stretched technical levels after a long period of growth supported by liquidity and corporate earnings. In this context, a consolidation or profit-taking phase is not unlikely, and such an environment often leads investors to rebalance their exposure toward less risky assets, including bonds.
The U.S. presidential cycle could also play a role. 2026 is the second year of the presidential cycle, which historically tends to be the weakest for the S&P 500, possibly triggering a partial rotation of capital toward bonds, perceived as more stable.
On the macroeconomic front, the prospect of lower interest rates by central banks is another factor to watch. Given high debt levels and a potential weakening of the labor market, the Federal Reserve and the European Central Bank could adopt a looser monetary policy. A decline in rates would mechanically support the value of already issued bonds.
At the same time, the gradual normalization of inflation favors a more predictable environment for bond investors. In the coming months, the impact of tariffs will fade, and more moderate inflation would stabilize real yields and strengthen the appeal of fixed income.
Relative bond yields have also become competitive again compared to equities, as the S&P 500 earnings yield now stands below the 10-year U.S. Treasury yield. For institutional investors, especially pension funds and insurance companies, these levels offer an opportunity for prudent diversification—particularly if equity markets stabilize or correct.
Added to this are fiscal constraints in several developed economies, which could limit stimulus policies and encourage greater market prudence.
In short, without predicting a bond market rally, several factors—relative valuations, monetary policy, inflation, and the economic cycle—suggest that 2026 could mark a period of stronger relative performance for bonds.
Chart showing the monthly candlesticks of the 20-year U.S. bond contract:
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.