While stocks continued to deliver strong returns in 2025, it's important not to ignore the fixed income sleeve of your portfolio. While they spent years struggling to yield much of anything during the Fed's zero interest rate policy years and had one of their worst years ever in 2022, the environment for bonds is now much improved.
Investors can still capture yields of 4% or greater across many points on the yield curve, and inflation is back to being contained. That establishes more of a neutral starting point where people can again consider fixed income as part of a traditional asset allocation as opposed to a low-yielding, low-potential anchor.
Fidelity's bond ETF lineup isn't huge -- only 13 funds currently -- but it does offer some nice options for taking advantage of the current landscape. With the U.S. economy facing a number of challenges and the direction of the Fed's interest rate policy unknown, a strategic approach to fixed income is advisable heading into the new year.
Here are three Fidelity bond ETFs that I like for 2026.
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Fidelity Total Bond ETF
The Fidelity Total Bond ETF (FBND 0.28%) doesn't really tilt in any particular direction. That's OK because it's the total bond market exposure that is its biggest feature. Most bond ETFs target either investment-grade bonds or junk bonds. FBND is one of the few that includes both in a single portfolio.
The inclusion of non-investment-grade, non-U.S. bonds, however, is relatively minimal. Only 9% of the portfolio is invested in junk bonds and 10% outside of the United States. It's just enough to add a little diversification and a little extra return potential without drifting too far away from its core positioning.
That could be important in 2026. Economic growth, inflation, the labor market, and the Fed are all moving parts that could send yields higher or lower next year. Sometimes the smart play is just to buy the market, capture the yield, and avoid taking any undue risks.
NYSEMKT: FBND
Key Data Points
Fidelity Enhanced Yield ETF
Active management has been making a comeback in the investment management space. After years of focusing on ultralow-fee index funds, fund issuers are returning to actively managed strategies to capture alpha in certain corners of the market.
The same thing is happening in the bond market. The Fidelity Enhanced Yield ETF (FDHY +0.10%) is using the junk bond universe as its starting point but then uses a factor-based approach to select those with the best combination of value and quality characteristics.
NYSEMKT: FDHY
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With the U.S. economy still looking healthy at this point and credit spreads showing little sign of cracking, 2026 could shape up to be another good year for high-yield bonds. In case conditions start to deteriorate, FDHY going after the higher quality, more financially stable end of the market could provide a bit of a buffer.
Fidelity Tactical Bond ETF
The Fidelity Tactical Bond ETF (FTBD 0.32%) could be considered a mix of the two ETFs we've discussed already.
Like FBND, it covers all areas of the fixed-income market: government and corporate bonds, investment-grade and junk (with minor potential exposures to convertibles and preferreds as well). Like FDHY, it examines valuation, quality, and fundamental characteristics in order to tactically rotate between sectors, credit qualities, and security types as the fund's managers see fit.
NYSEMKT: FTBD
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Next year is likely to be one when active management could really pay off. Most global central banks are probably at or near the end of their rate-cutting cycles, so the "easy" money may already have been made. Now that yields have stabilized somewhat, the next big opportunity to capture alpha may come from security selection as opposed to yield.