It's also time to consider adding bond duration, she said, going from "very short" to "extending duration somewhat."
As interest rates change, advisors weigh so-called duration, which measures a bond's sensitivity to interest rate changes. Duration factors in the coupon, time to maturity and yield paid through the term.to shield portfolios from interest rate risk. But allocations may shift to longer-duration bonds as Fed policy changes., Desai said, which typically pay a larger coupon, but have a higher default risk.
"If you can take volatility over the next 18 months or so, high-yield is offering 8.5%, sometimes close to 9%," she said.Fed's July meeting will be 'live' interest rate hike decision, says Fed's Jerome PowellWhile these assets are riskier amid economic uncertainty, Desai believes a possible U.S. recession may be "pretty mild."
"Default probably will pick up which is why you don't buy the index," she said. But investors may lock in "pretty interesting yields" by picking individual corporate bonds.