2022 has been a very challenging year for both bonds and stocks. Bonds, traditionally seen as safe havens, plunged in almost lockstep with stocks this year and suffered their first major bear market in over four decades.

Many experts predict that 2023 could be a better year for bonds as the US economy could fall into a mild recession. Further, with yields at the highest levels since the financial crisis, bonds are now seen as income alternative to stocks.

Even though the Fed plans to keep hiking rates in early 2023, most of its aggressive tightening cycle is over. Inflation is also likely to decline next year, which may benefit fixed income investments.

In the past few weeks, we have seen significant inflows into fixed income ETFs. Many investors have dumped their bond mutual funds and bought similar ETFs for tax-loss harvesting. ETFs are not only generally cheaper than mutual funds, they are also much more tax efficient.

To learn more about the SPDR Bloomberg 3-12 Month T-Bill ETF (BILS Quick QuoteBILS - Free Report) , the Vanguard Short-Term Treasury ETF (VGSH Quick QuoteVGSH - Free Report) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB Quick QuoteIGSB - Free Report) , please watch the short video above.