Insights that go beyond the numbers. Use these charts to power your storytelling and help clients make better investment decisions.
Get the Midyear Outlook in 5 charts
At the midpoint of 2026, the S&P 500 Index has overcome several challenges to reach new highs. Can this trend continue? Download this e-book to help clients focus on five investment themes driving markets.
Market selloffs tied to oil supply shocks have been short-lived
Oil shocks are common sources of market volatility, yet stocks have historically climbed higher
Sources: Capital Group, Bloomberg, S&P Global. Geopolitical shocks include: Gulf War (8/1990), Second Gulf War (3/2003), Niger Delta supply disruptions (2/2006), Arab Spring, Libya Civil War (2/2011), Hormuz closure risk, Iran sanctions (12/2011), Drone attack on Saudi installations (9/2019), Russian invasion of Ukraine (2/2022). Event dates are aligned to the nearest observable market price ("T"). If a shock occurs on a non‑trading day, the prior trading day is used as the start date. Horizon returns are measured using the first available trading day on or after the stated calendar horizon (e.g. "T+2 days"). Figures reflect total returns. As of May 31, 2026.
Past results are not predictive of results in future periods.
Sources: Capital Group, Bloomberg, S&P Global. Geopolitical shocks include: Gulf War (8/1990), Second Gulf War (3/2003), Niger Delta supply disruptions (2/2006), Arab Spring, Libya Civil War (2/2011), Hormuz closure risk, Iran sanctions (12/2011), Drone attack on Saudi installations (9/2019), Russian invasion of Ukraine (2/2022). Event dates are aligned to the nearest observable market price ("T"). If a shock occurs on a non‑trading day, the prior trading day is used as the start date. Horizon returns are measured using the first available trading day on or after the stated calendar horizon (e.g. "T+2 days"). Figures reflect total returns. As of May 31, 2026.
Past results are not predictive of results in future periods.
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Key takeaways
The Iran war is a stark reminder that the world still runs on oil. When supply is threatened, the impact of higher oil prices spreads quickly to businesses, consumers, and global markets.
When geopolitical shocks don’t result in prolonged physical supply outages, markets have bounced back quickly. Across seven oil supply shocks since the First Gulf War in the 1990s to Russia’s invasion of Ukraine in 2022, equities fell on average by 1% two weeks following the disruption, then rose 1.4% a month later, 12% a year later and 32.3% over the next two years.
It highlights that markets are forward-looking and may already be anticipating a resolution to the present crisis.
Footnote(s)/Important information:
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
S&P 500 Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks.
BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Market selloffs tied to oil supply shocks have been short-lived
Sources: Capital Group, Bloomberg, S&P Global. Geopolitical shocks include: Gulf War (8/1990), Second Gulf War (3/2003), Niger Delta supply disruptions (2/2006), Arab Spring, Libya Civil War (2/2011), Hormuz closure risk, Iran sanctions (12/2011), Drone attack on Saudi installations (9/2019), Russian invasion of Ukraine (2/2022). Event dates are aligned to the nearest observable market price (""T""). If a shock occurs on a non‑trading day, the prior trading day is used as the start date. Horizon returns are measured using the first available trading day on or after the stated calendar horizon (e.g. ""T+2 days""). Figures reflect total returns. As of May 31, 2026.
Past results are not predictive of results in future periods.
Market selloffs tied to oil supply shocks have been short-lived
Sources: Capital Group, Bloomberg, S&P Global. Geopolitical shocks include: Gulf War (8/1990), Second Gulf War (3/2003), Niger Delta supply disruptions (2/2006), Arab Spring, Libya Civil War (2/2011), Hormuz closure risk, Iran sanctions (12/2011), Drone attack on Saudi installations (9/2019), Russian invasion of Ukraine (2/2022). Event dates are aligned to the nearest observable market price (""T""). If a shock occurs on a non‑trading day, the prior trading day is used as the start date. Horizon returns are measured using the first available trading day on or after the stated calendar horizon (e.g. ""T+2 days""). Figures reflect total returns. As of May 31, 2026.
Past results are not predictive of results in future periods.
Market selloffs tied to oil supply shocks have been short-lived
Oil shocks are common sources of market volatility, yet stocks have historically climbed higher
Sources: Capital Group, Bloomberg, S&P Global. Geopolitical shocks include: Gulf War (8/1990), Second Gulf War (3/2003), Niger Delta supply disruptions (2/2006), Arab Spring, Libya Civil War (2/2011), Hormuz closure risk, Iran sanctions (12/2011), Drone attack on Saudi installations (9/2019), Russian invasion of Ukraine (2/2022). Event dates are aligned to the nearest observable market price ("T"). If a shock occurs on a non‑trading day, the prior trading day is used as the start date. Horizon returns are measured using the first available trading day on or after the stated calendar horizon (e.g. "T+2 days"). Figures reflect total returns. As of May 31, 2026.
Past results are not predictive of results in future periods.
Sources: Capital Group, Bloomberg, S&P Global. Geopolitical shocks include: Gulf War (8/1990), Second Gulf War (3/2003), Niger Delta supply disruptions (2/2006), Arab Spring, Libya Civil War (2/2011), Hormuz closure risk, Iran sanctions (12/2011), Drone attack on Saudi installations (9/2019), Russian invasion of Ukraine (2/2022). Event dates are aligned to the nearest observable market price ("T"). If a shock occurs on a non‑trading day, the prior trading day is used as the start date. Horizon returns are measured using the first available trading day on or after the stated calendar horizon (e.g. "T+2 days"). Figures reflect total returns. As of May 31, 2026.
Past results are not predictive of results in future periods.
Turn device sideways for larger view
Key takeaways
The Iran war is a stark reminder that the world still runs on oil. When supply is threatened, the impact of higher oil prices spreads quickly to businesses, consumers, and global markets.
When geopolitical shocks don’t result in prolonged physical supply outages, markets have bounced back quickly. Across seven oil supply shocks since the First Gulf War in the 1990s to Russia’s invasion of Ukraine in 2022, equities fell on average by 1% two weeks following the disruption, then rose 1.4% a month later, 12% a year later and 32.3% over the next two years.
It highlights that markets are forward-looking and may already be anticipating a resolution to the present crisis.
Footnote(s)/Important information:
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
S&P 500 Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks.
BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Markets have rebounded sharply after midterm elections
History shows market strengthened once election-related uncertainty lifted
Sources: Capital Group, RIMES, S&P Global. Calculations use Election Day as the starting date in all election years, and November 5 as a proxy for the starting date in other years. Only midterm election years are shown in the chart. As of December 31, 2025. Price returns exclude the reinvestment of dividends and capital distributions.
Past results are not predictive of results in future periods.
Sources: Capital Group, RIMES, S&P Global. Calculations use Election Day as the starting date in all election years, and November 5 as a proxy for the starting date in other years. Only midterm election years are shown in the chart. As of December 31, 2025. Price returns exclude the reinvestment of dividends and capital distributions.
Past results are not predictive of results in future periods.
Turn device sideways for larger view
Key takeaways
As most people know, the party in power tends to lose ground in the midterm. Leading up to the election, that uncertainty can stir market volatility. But once the results are decided, markets tend to rally. In fact, the average return in the year after a midterm election year is 15.4%, which is roughly double all other years.
Every cycle is different though, and elections are just one of many factors influencing market returns. So far, the competing forces of rising corporate earnings, the Iran war and a powerful rally in AI stocks are driving market activity, but that could change as investors turn their attention to what is likely to be a polarized election.
Footnote(s)/Important information:
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
S&P 500 Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Markets have rebounded sharply after midterm elections
Sources: Capital Group, RIMES, S&P Global. Calculations use Election Day as the starting date in all election years, and November 5 as a proxy for the starting date in other years. Only midterm election years are shown in the chart. As of December 31, 2025. Price returns exclude the reinvestment of dividends and capital distributions.
Past results are not predictive of results in future periods.
Markets have rebounded sharply after midterm elections
Sources: Capital Group, RIMES, S&P Global. Calculations use Election Day as the starting date in all election years, and November 5 as a proxy for the starting date in other years. Only midterm election years are shown in the chart. As of December 31, 2025. Price returns exclude the reinvestment of dividends and capital distributions.
Past results are not predictive of results in future periods.
Markets have rebounded sharply after midterm elections
History shows market strengthened once election-related uncertainty lifted
Sources: Capital Group, RIMES, S&P Global. Calculations use Election Day as the starting date in all election years, and November 5 as a proxy for the starting date in other years. Only midterm election years are shown in the chart. As of December 31, 2025. Price returns exclude the reinvestment of dividends and capital distributions.
Past results are not predictive of results in future periods.
Sources: Capital Group, RIMES, S&P Global. Calculations use Election Day as the starting date in all election years, and November 5 as a proxy for the starting date in other years. Only midterm election years are shown in the chart. As of December 31, 2025. Price returns exclude the reinvestment of dividends and capital distributions.
Past results are not predictive of results in future periods.
Turn device sideways for larger view
Key takeaways
As most people know, the party in power tends to lose ground in the midterm. Leading up to the election, that uncertainty can stir market volatility. But once the results are decided, markets tend to rally. In fact, the average return in the year after a midterm election year is 15.4%, which is roughly double all other years.
Every cycle is different though, and elections are just one of many factors influencing market returns. So far, the competing forces of rising corporate earnings, the Iran war and a powerful rally in AI stocks are driving market activity, but that could change as investors turn their attention to what is likely to be a polarized election.
Footnote(s)/Important information:
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
S&P 500 Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Physical economy stocks are poised for a comeback
A comparison to NVIDIA suggests potential value in major sectors
Sources: Capital Group, FactSet, RIMES, S&P Global. As of May 31, 2026. Companies shown are the three largest in their respective sectors within the S&P 500 Index. Caterpillar is the S&P 500 Index industrials sector’s largest company by market capitalization.
Sources: Capital Group, FactSet, RIMES, S&P Global. As of May 31, 2026. Companies shown are the three largest in their respective sectors within the S&P 500 Index. Caterpillar is the S&P 500 Index industrials sector’s largest company by market capitalization.
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Key takeaways
We may be living in an AI world, but that’s no reason for investors to ignore old economy companies.
NVIDIA’s market capitalization has climbed to $5.1 trillion, as of May 31, 2026, driven by massive spending to build data centers. To put that in perspective, NVIDIA’s market cap is larger than the combined value of three major sectors in the S&P 500 Index: energy, utilities and materials. This means investors could have a broader opportunity set, beyond big tech, into the companies supplying the tools that make AI possible, for example, Caterpillar‘s power generation equipment used in data centers.
Energy and utilities also offer opportunities to diversify portfolios while providing steady dividends and exposure to AI.
Footnote(s)/Important information:
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
S&P 500 Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Physical economy stocks are poised for a comeback
Sources: Capital Group, FactSet, RIMES, S&P Global. As of May 31, 2026. Companies shown are the three largest in their respective sectors within the S&P 500 Index. Caterpillar is the S&P 500 Index industrials sector’s largest company by market capitalization.
Physical economy stocks are poised for a comeback
Sources: Capital Group, FactSet, RIMES, S&P Global. As of May 31, 2026. Companies shown are the three largest in their respective sectors within the S&P 500 Index. Caterpillar is the S&P 500 Index industrials sector’s largest company by market capitalization.
Physical economy stocks are poised for a comeback
A comparison to NVIDIA suggests potential value in major sectors
Sources: Capital Group, FactSet, RIMES, S&P Global. As of May 31, 2026. Companies shown are the three largest in their respective sectors within the S&P 500 Index. Caterpillar is the S&P 500 Index industrials sector’s largest company by market capitalization.
Sources: Capital Group, FactSet, RIMES, S&P Global. As of May 31, 2026. Companies shown are the three largest in their respective sectors within the S&P 500 Index. Caterpillar is the S&P 500 Index industrials sector’s largest company by market capitalization.
Turn device sideways for larger view
Key takeaways
We may be living in an AI world, but that’s no reason for investors to ignore old economy companies.
NVIDIA’s market capitalization has climbed to $5.1 trillion, as of May 31, 2026, driven by massive spending to build data centers. To put that in perspective, NVIDIA’s market cap is larger than the combined value of three major sectors in the S&P 500 Index: energy, utilities and materials. This means investors could have a broader opportunity set, beyond big tech, into the companies supplying the tools that make AI possible, for example, Caterpillar‘s power generation equipment used in data centers.
Energy and utilities also offer opportunities to diversify portfolios while providing steady dividends and exposure to AI.
Footnote(s)/Important information:
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
S&P 500 Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Innovation and income: Healthcare's powerful combination
Robust drug pipelines and free cash flow support long-term return potential
Innovation and income: Healthcare's powerful combination
Sources: Capital Group, Bloomberg, MSCI, RIMES, company reports. Dividend yield is represented by the forward 12-month dividend yield based on latest consensus figures and company announcements. Free cash flow growth is annualized based on 2026 and 2027 consensus estimates. Pipeline figures based on data available from individual company webpages and includes drugs in Phase 1 to 3 of clinical trials or in the filing stage. Pharmaceutical companies listed represent seven of the largest constituents of the MSCI All Country World Pharmaceuticals Index. Pipelines up to date as of calendar Q1 2026 financial reporting except for Eli Lilly, which is as of calendar year 2025. As of May 31, 2026.
Sources: Capital Group, Bloomberg, MSCI, RIMES, company reports. Dividend yield is represented by the forward 12-month dividend yield based on latest consensus figures and company announcements. Free cash flow growth is annualized based on 2026 and 2027 consensus estimates. Pipeline figures based on data available from individual company webpages and includes drugs in Phase 1 to 3 of clinical trials or in the filing stage. Pharmaceutical companies listed represent seven of the largest constituents of the MSCI All Country World Pharmaceuticals Index. Pipelines up to date as of calendar Q1 2026 financial reporting except for Eli Lilly, which is as of calendar year 2025. As of May 31, 2026.
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Key takeaways
Deep pipelines provide pharmaceutical companies with a powerful growth engine and reduce reliance on any single product. Many also generate healthy free cash flow, allowing them to return capital to shareholders through dividends or strengthen pipelines through targeted acquisitions.
AstraZeneca, for example, has a well-established range of oncology franchises. To drive future growth potential, it has assets targeting everything from heart disease, chronic kidney problems to metabolic conditions. The combination of innovation-led growth and dividend defensiveness can potentially enhance portfolio resilience while still offering compelling upside.
Footnote(s)/Important information:
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
MSCI All Country World Pharmaceuticals Index is composed of large- and mid-cap stocks across 23 Developed Market countries that are classified in the Pharmaceuticals industry group according to the Global Industry Classification Standard (GICS®).
BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.u
The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.(www.msci.com)
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Innovation and income: Healthcare's powerful combination
Sources: Capital Group, Bloomberg, MSCI, RIMES, company reports. Dividend yield is represented by the forward 12-month dividend yield based on latest consensus figures and company announcements. Free cash flow growth is annualized based on 2026 and 2027 consensus estimates. Pipeline figures based on data available from individual company webpages and includes drugs in Phase 1 to 3 of clinical trials or in the filing stage. Pharmaceutical companies listed represent seven of the largest constituents of the MSCI All Country World Pharmaceuticals Index. Pipelines up to date as of calendar Q1 2026 financial reporting except for Eli Lilly, which is as of calendar year 2025. As of May 31, 2026.
Innovation and income: Healthcare's powerful combination
Sources: Capital Group, Bloomberg, MSCI, RIMES, company reports. Dividend yield is represented by the forward 12-month dividend yield based on latest consensus figures and company announcements. Free cash flow growth is annualized based on 2026 and 2027 consensus estimates. Pipeline figures based on data available from individual company webpages and includes drugs in Phase 1 to 3 of clinical trials or in the filing stage. Pharmaceutical companies listed represent seven of the largest constituents of the MSCI All Country World Pharmaceuticals Index. Pipelines up to date as of calendar Q1 2026 financial reporting except for Eli Lilly, which is as of calendar year 2025. As of May 31, 2026.
Innovation and income: Healthcare's powerful combination
Robust drug pipelines and free cash flow support long-term return potential
Innovation and income: Healthcare's powerful combination
Sources: Capital Group, Bloomberg, MSCI, RIMES, company reports. Dividend yield is represented by the forward 12-month dividend yield based on latest consensus figures and company announcements. Free cash flow growth is annualized based on 2026 and 2027 consensus estimates. Pipeline figures based on data available from individual company webpages and includes drugs in Phase 1 to 3 of clinical trials or in the filing stage. Pharmaceutical companies listed represent seven of the largest constituents of the MSCI All Country World Pharmaceuticals Index. Pipelines up to date as of calendar Q1 2026 financial reporting except for Eli Lilly, which is as of calendar year 2025. As of May 31, 2026.
Sources: Capital Group, Bloomberg, MSCI, RIMES, company reports. Dividend yield is represented by the forward 12-month dividend yield based on latest consensus figures and company announcements. Free cash flow growth is annualized based on 2026 and 2027 consensus estimates. Pipeline figures based on data available from individual company webpages and includes drugs in Phase 1 to 3 of clinical trials or in the filing stage. Pharmaceutical companies listed represent seven of the largest constituents of the MSCI All Country World Pharmaceuticals Index. Pipelines up to date as of calendar Q1 2026 financial reporting except for Eli Lilly, which is as of calendar year 2025. As of May 31, 2026.
Turn device sideways for larger view
Key takeaways
Deep pipelines provide pharmaceutical companies with a powerful growth engine and reduce reliance on any single product. Many also generate healthy free cash flow, allowing them to return capital to shareholders through dividends or strengthen pipelines through targeted acquisitions.
AstraZeneca, for example, has a well-established range of oncology franchises. To drive future growth potential, it has assets targeting everything from heart disease, chronic kidney problems to metabolic conditions. The combination of innovation-led growth and dividend defensiveness can potentially enhance portfolio resilience while still offering compelling upside.
Footnote(s)/Important information:
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
MSCI All Country World Pharmaceuticals Index is composed of large- and mid-cap stocks across 23 Developed Market countries that are classified in the Pharmaceuticals industry group according to the Global Industry Classification Standard (GICS®).
BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.u
The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.(www.msci.com)
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Bonds hit a sweet spot for income and diversification
Bonds emerged more resilient following the Federal Reserve’s 2022 hiking cycle
Sources: Capital Group, Bloomberg. As of May 31, 2026. Duration is a measure of a bond’s price sensitivity to interest rate changes, expressed in years. Yield to worst is the lowest possible annualized return an investor could receive, assuming no default and that the bond is called, put or held to maturity. Fed funds target rate reflects upper bound of range.
Sources: Capital Group, Bloomberg. As of May 31, 2026. Duration is a measure of a bond’s price sensitivity to interest rate changes, expressed in years. Yield to worst is the lowest possible annualized return an investor could receive, assuming no default and that the bond is called, put or held to maturity. Fed funds target rate reflects upper bound of range.
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Key takeaways
Bonds have reclaimed their role in portfolios, offering stronger return potential and better diversification at a time when investors need both.
Starting yields of roughly 4.5% to 5% for the Bloomberg U.S. Aggregate Index provide a solid baseline return expectation and have historically been a good guide to future returns. That income also helps cushion portfolios amid uncertainty around growth and inflation.
This is a sharp contrast to 2022, when yields were below 2% and policy flexibility was limited. Bonds today are less sensitive to interest rate risks. Moreover, bonds may provide stronger diversification in equity sell-offs, given the Federal Reserve has ample room to cut interest rates.
Footnote(s)/Important information:
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
Bloomberg U.S. Aggregate Index represents the U.S. investment-grade fixed-rate bond market.
Duration is a measure of a bond's price sensitivity to interest rate changes, expressed in years.
Yield to worst is the lowest possible annualized return an investor could receive, assuming no default and that the bond is called, put or held to maturity.
BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Bonds hit a sweet spot for income and diversification
Sources: Capital Group, Bloomberg. As of May 31, 2026. Duration is a measure of a bond’s price sensitivity to interest rate changes, expressed in years. Yield to worst is the lowest possible annualized return an investor could receive, assuming no default and that the bond is called, put or held to maturity. Fed funds target rate reflects upper bound of range.
Bonds hit a sweet spot for income and diversification
Sources: Capital Group, Bloomberg. As of May 31, 2026. Duration is a measure of a bond’s price sensitivity to interest rate changes, expressed in years. Yield to worst is the lowest possible annualized return an investor could receive, assuming no default and that the bond is called, put or held to maturity. Fed funds target rate reflects upper bound of range.
Bonds hit a sweet spot for income and diversification
Bonds emerged more resilient following the Federal Reserve’s 2022 hiking cycle
Sources: Capital Group, Bloomberg. As of May 31, 2026. Duration is a measure of a bond’s price sensitivity to interest rate changes, expressed in years. Yield to worst is the lowest possible annualized return an investor could receive, assuming no default and that the bond is called, put or held to maturity. Fed funds target rate reflects upper bound of range.
Sources: Capital Group, Bloomberg. As of May 31, 2026. Duration is a measure of a bond’s price sensitivity to interest rate changes, expressed in years. Yield to worst is the lowest possible annualized return an investor could receive, assuming no default and that the bond is called, put or held to maturity. Fed funds target rate reflects upper bound of range.
Turn device sideways for larger view
Key takeaways
Bonds have reclaimed their role in portfolios, offering stronger return potential and better diversification at a time when investors need both.
Starting yields of roughly 4.5% to 5% for the Bloomberg U.S. Aggregate Index provide a solid baseline return expectation and have historically been a good guide to future returns. That income also helps cushion portfolios amid uncertainty around growth and inflation.
This is a sharp contrast to 2022, when yields were below 2% and policy flexibility was limited. Bonds today are less sensitive to interest rate risks. Moreover, bonds may provide stronger diversification in equity sell-offs, given the Federal Reserve has ample room to cut interest rates.
Footnote(s)/Important information:
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
Bloomberg U.S. Aggregate Index represents the U.S. investment-grade fixed-rate bond market.
Duration is a measure of a bond's price sensitivity to interest rate changes, expressed in years.
Yield to worst is the lowest possible annualized return an investor could receive, assuming no default and that the bond is called, put or held to maturity.
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