Your Money: The Fed and fixed-income markets

What could the Federal Reserve's decision next week mean for the fixed-income markets? That depends on bonds, said Laura LaRosa, director of portfolio management at Glenmede in Philadelphia.

"There's been a lot of uncertainty in fixed income of late, but we feel the 'taper' talk has corrected the bond market already," she said in an interview. The taper refers to what the Fed decides Tuesday about its historic bond-buying program. The Fed has propped up bonds with a record $85 billion in monthly purchases, and now wants to decrease that amount.

"They might reduce purchases by $10 billion a month in Treasuries, maximum $25 billion. In all likelihood, the Fed won't stop buying mortgages, since they don't want to stall the housing recovery," LaRosa added. "Besides, rates have moved so much, the market has done a lot of the change for the Fed already."

Glenmede prefers municipal bonds for its high-net-worth clients in the top tax brackets. "We view any correction in munis as a buying opportunity," LaRosa said.

Generally a good overall return on a 10-year muni bond is about 3 percent, and that's tax-free. Glenmede also recommends buying bank loans for a portfolio - but only in a mutual fund.

"You need someone who's going to manage that portfolio for you," she said. Better to have a lot of different loans in the fund, so one problem doesn't come back to haunt you, she added.

Finally, Glenmede would also be a buyer of stocks on any correction.

"The whole move across the fixed-income spectrum is because of talk of the Fed removing the stimulus and rates trending higher," LaRosa explained. "The stock market has corrected itself too. But the Fed will only taper when the economy is on firm footing. It's a very positive sign [whenever] they taper."