There Seems to Be No End in Sight to Wall Street's Volatility. The Best Way to Generate Some Safe Returns Before the End of the Year

Recent market turbulence has left many investors looking for ways to earn steady returns without the rollercoaster of volatility.

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On Tuesday, the Dow Jones Industrial Average rebounded sharply, recovering from an early drop of more than 600 points sparked by renewed U.S.-China trade worries. By afternoon, the blue-chip index was up over 400 points, while the S&P 500 and Nasdaq also clawed back losses, with the S&P up roughly 0.3%.

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The Cboe Volatility Index (VIX) Wall Street’s so-called “fear gauge” briefly surged above 22, marking a four-month high, before settling near 19.5, a level considered moderate.

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Tuesday’s moves followed Monday’s rally and Friday’s selloff, underscoring the market’s choppiness. Wells Fargo Investment Institute expects that instability to persist through earnings season.

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“Investors remain sensitive to trade headlines and other uncertainties,” said Doug Beath, global equity strategist at Wells Fargo. “With high expectations for earnings growth, the focus will likely shift to forward guidance on tech spending and tariff adjustments.”

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He added that the ongoing government shutdown could further sway markets by influencing hiring plans, interest rates, and currencies.

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To navigate this volatility, certified financial planner Chuck Failla, CEO of Sovereign Financial Group, advises investors to stick to a plan and focus on generating consistent income.

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“We’re still near all-time market highs,” Failla said. “Today’s swings should remind investors to implement the strategies they’ve been putting off.”

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For funds needed within a year, Failla recommends keeping money in safe, liquid assets such as money market funds, certificates of deposit (CDs), and Treasury bills.

“The key for short-term cash is to protect your principal,” he said. “You have to accept lower returns in exchange for safety.”

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While yields have cooled as the Federal Reserve cuts rates, investors can still find competitive payouts. The Fed lowered its benchmark rate by 0.25 percentage points in September and hinted at two more cuts before year-end. Futures markets are now pricing in a 97% chance of another quarter-point cut later this month, according to the CME FedWatch Tool.

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Even so, annualized returns remain appealing: the Crane 100 index of top taxable money funds shows a seven-day yield of 3.94%. Laddering CDs with different maturities can also help maintain access to cash without incurring early withdrawal penalties.

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UBS currently favors high-quality fixed income investments, expecting slower growth, a softer Fed stance, and continued market volatility through year-end. The firm prefers bonds in the three-to-five-year range.

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“We believe yield rather than spread compression will drive returns going forward,” said Leslie Falconio, head of taxable fixed income strategy at UBS Americas.

Falconio is neutral on investment-grade corporate bonds, which remain tight on spreads but still offer solid income potential. Instead, she prefers agency mortgage-backed securities (MBS) and commercial MBS.

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Agency MBS, issued by Fannie Mae, Freddie Mac, or Ginnie Mae, carry low credit risk since they’re backed by the U.S. government. Falconio noted that current coupon MBS yield 5.15%, slightly higher than the 5.05% yield on BBB-rated corporate bonds with better liquidity and credit quality.

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She also sees opportunity in A-rated and above commercial MBS, adding that a dovish Fed should continue supporting the sector.

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Wells Fargo echoes this view, favoring investment-grade corporates with maturities of three to five years. “Corporate balance sheets remain resilient, with post-COVID management teams demonstrating stronger fiscal discipline,” wrote analyst Tony Miano.

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He noted that S&P 500 companies collectively hold around $2 trillion in cash, supporting earnings stability. “While we don’t expect major economic shocks, we advise investors to move up in credit quality to balance income needs with risk management,” he said.

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Failla also includes high-quality bonds in his “bucket strategy.” For money needed in one to two years, he allocates 90% to fixed income including investment-grade corporates and 10% to blue-chip or dividend-paying stocks. As time horizons lengthen, he increases the equity portion to enhance growth potential.

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BlackRock’s global fixed income chief Rick Rieder sees attractive opportunities abroad, particularly in European investment-grade credit, high yield, and securitized products. “The opportunity set overseas is expanding, especially in securitized credit,” he said. Rieder also finds value in emerging-market local rate bonds, which benefit from a weaker dollar.

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Meanwhile, municipal bonds continue to shine for U.S. investors, especially those in higher tax brackets. UBS noted that investment-grade munis rallied in September but still offer compelling yields that are tax-free at the federal level and often at the state level, too.

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“Municipal bonds provide a strong tax-equivalent yield advantage over similarly rated corporates,” said UBS strategist Sudip Mukherjee. “They also offer diversification benefits, given their lower correlation with equities.”

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Hilltop Securities’ Tom Kozlik urged investors not to delay. “Economic cracks are widening, and the Fed is signaling more cuts,” he said. “Those waiting for clarity may miss today’s combination of strong credit fundamentals and historically attractive tax-exempt yields.”

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While it’s wise to guard against volatility, Failla stressed that long-term investors shouldn’t completely pull out of stocks. “Timing the market doesn’t work,” he said. “Equities have historically served as a hedge against inflation.”

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For funds needed in 10 years or longer, Failla allocates 90% to 95% to equities. Wells Fargo shares that optimism, maintaining a 2026 year-end target of 7,400 to 7,600 for the S&P 500, with earnings growth expected to drive returns.

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The firm continues to favor high-quality segments of the market particularly large- and mid-cap stocks  with financials remaining its top-rated sector.

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In short, amid uncertainty, experts recommend blending quality fixed income, select equities, and opportunistic global investments to weather volatility while keeping portfolios positioned for growth.

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