Fidelity noted that the high-yield bond market in the United States still offers an attractive total yield, but narrow spreads pose a limitation. However, supported by strong corporate fundamentals and technical factors, it is expected that spreads will drive returns. Although spreads may continue to narrow, risks are starting to show, especially with the potential shift from the Fed's rate cuts and upcoming changes in tariffs, government spending, and immigration policies. From an industry perspective, Fidelity sees opportunities in the telecom and basic industrial sectors, where value can be added through credit selection. On the other hand, due to potential policy changes that may lead to lower oil prices and shifts in capital allocation strategies, Fidelity remains cautious on the energy sector. Fidelity pointed out that the US high-yield bond market still offers an attractive total yield, but narrow spreads pose a limitation. Furthermore, supported by strong fundamental and technical factors, it is expected that spreads will drive returns over the next year. On the positive side, companies' fundamentals remain strong, with credit indicators showing that companies are not taking on excessive risk overall. Despite spreads nearing historical lows, the quality of the US high-yield bond index is higher than in most periods of history. The index is mostly composed of BB-rated bonds, with secured notes making up over a third, proving that current spreads are reasonable. Given the strong performance of corporate balance sheets and the increasing options for extending default bond periods through activities like debt management or private credit, default rates are expected to remain low. However, even though spreads have not yet reached their lowest point, they are definitely approaching it, and some risks are emerging. Firstly, the Fed may reconsider its rate-cut pace next year, which could force the market to reassess the strength of companies, especially those relying on lower refinancing costs. As companies seek new borrowing, increase in new bond issuances due to more mergers and acquisitions, and weakening momentum in bond rating upgrades, the technical factors supporting may also weaken. Investors also need to consider the impact of upcoming changes in tariffs, government spending, and immigration policies on various credits, which could create winners and losers. Fidelity suggests that credit spreads may still narrow further, but as spreads tighten, the margin for error shrinks. Therefore, investors need to adopt defensive strategies and be selective in their investments. Fortunately, there are many opportunities for credit selection, especially in the areas of B and CCC rated bonds, where the differences between bonds are still significant. The core strategy remains to identify and invest in bonds that are highly favored, while avoiding credits with significant downside risks. The telecom sector is currently attracting attention, with spreads significantly higher than the index average, by nearly 200 basis points, making it the only industry with spreads higher than the index. However, many telecom companies are overleveraged, struggling to adapt to long-term demand changes, and burdened by heavy capital expenditure, so the presence of such spreads may not be surprising. Recent favorable developments have led investors to reevaluate this neglected industry. It has been proven that the fundamentals of some sub-sectors in the telecom industry, like cable, are stronger than expected. In addition, the demand for fiber optic capacity within data centers has been unexpectedly boosted by artificial intelligence, bringing additional positive factors. Finally, increased merger activities highlight the potential value of assets and fuel speculation on future mergers, a trend that may accelerate with further relaxation of regulations. Fidelity believes that the basic industrial sector is another area where value can be added through credit selection, including chemicals, construction materials, and metal and mining industries. While the potential negative impact of tariffs poses a significant threat to these industries, the ultimate impact will vary for each company based on their geographical and supply chain risks. Despite facing pressure on input costs, companies have different pricing power, with some able to pass costs on to customers depending on the supply-demand balance of their market and the size of their competitive moat. The good news is that debt levels in the basic industrial sector are lower than historical levels and the overall market, capable of withstanding the upcoming challenges. Investors should be cautious when it comes to the energy sector. While the general market believes that the energy sector will perform strongly under the new government leadership, policies encouraging increased production coupled with potential impacts on global economic growth may lead to lower oil prices. In recent times, investors have favored energy companies, leading to high valuations, but healthy balance sheets. However, management teams are likely to increase capital expenditure and seek mergers due to regulatory relaxation, signaling a shift from the conservative capital allocation seen in recent years. In fact, for many of the same reasons, the energy sector performed poorly in Trump's first term. However, there are still differences within the energy sector, with potential winners including liquefied natural gas exporters and oilfield services among other sub-sectors.