Find ATTRACTIVE YIELDS in Today's Market

Our field guide to income investments identifies opportunities that range from ordinary to downright exotic.

- ANDREW TANZER

Early 2022 was a period most investors would prefer to forget. Stocks slumped, and the bond market suffered its worst rout in more than 40 years. There was no shortage of culprits: soaring energy prices, rising inflation, higher interest rates and new geopolitical risk in the form of the horrifying war in Ukraine.

Moreover, the Federal Reserve Board, which underestimated the extent of the inflation challenge, is swiftly pivoting to a hawkish monetary policy. “The Fed is laughably far behind the curve,” says Spenser Lerner, head of multiasset solutions at Harbor Capital Advisors. He expects the central bank to jack up the Federal Funds Rate (the rate that banks charge each other for overnight loans) from a current 0.25%- to-0.50% target range (as of mid April) to at least 2.75% by 2023. At the same time, the Fed will flip from the massive bond-buying program known as quantitative easing, which it favored during the COVID-19-era economy, to quantitative tightening. That means shrinking its bloated rate hikes). Weaker stock prices combined with strong corporate earnings and dividend increases have created some opportunities in income stocks. Shares of closed-end funds are selling at steeper discounts to the value of the assets in their portfolios, due to market volatility. Energy shortages and surging prices have made oil and gas pipelines—including master limited partnerships—a hot sector again.