As we head towards the end of the year, many financial advisors are having what I am sure are some difficult discussions with their clients. Obviously, this has been a hard year for many investors, marked by volatility, rising interest rates, economic uncertainty, and strong geopolitical tensions. All of this led to many—if not most—client portfolios suffering losses as the majority of asset classes were down. While looking ahead may not bring much solace to these conversations as inflation remains stubbornly high and there are signs of an impending recession, the current environment does offer a few silver linings.

Higher yields mean that accessing income streams for clients may not be as challenging as in recent years, although the bond market is likely to still be volatile. For individuals with “cash on the sidelines,” this may be a good time to enter the fixed income market, particularly from a long-term perspective.

But perhaps, most importantly, this is likely the best time in years, and arguably my entire career, to take advantage of tax loss harvesting opportunities because they are not just limited to equities but include fixed income after bonds experienced one of their worst years in decades.

Tax-loss harvesting is a long-tried tax management practice that can help investors minimize taxes while simultaneously fine tuning their portfolios. In a typical year, the opportunities to consider tax loss harvesting usually are limited to a particular asset class or poorly performing investment vehicle. In other words, advisors can look across a portfolio to find the fund managers that have not performed up to expectations or perhaps trim holdings in an asset class that has underperformed.

However, this year is different. We have seen across-the-board declines in asset classes leading to a plethora of opportunities for tax loss harvesting.

Most notably, 2022 has created an extraordinary moment for fixed income. As a result of the volatility triggered by the Federal Reserve interest rate hikes, investors have seen deep declines in the face value of bonds across asset classes, including Treasuries, municipal bonds, investment grade credit and high yield. Advisors can therefore consider taking some losses in parts of their bond portfolio to offset other taxes. Meanwhile, they can maintain access to fixed income with exchange-traded funds, using them to express views on areas of opportunity in the bond market, or retain exposure to a client’s credit and duration position in line with their investment goals.

There are now fixed income ETFs for virtually every segment of the bond market, from credit to munis to duration. Advisors can build bond ladders with ETFs containing thousands of individual bonds in a single trade with low fees and a transparent bid-ask spread.

While this is a historic moment for tax loss harvesting in fixed income, equity markets also present opportunities. Many investors have built up concentrated holdings in either individual securities or within mutual funds in “growth” sectors like technology, which were particularly hard hit in 2022. Investors could take a loss, perhaps avoid a capital gain distribution from a mutual fund, improve diversification, and strengthen alignment with a portfolio’s risk and return characteristics.

Advisors may also want to consider blending some traditional sector holdings with more thematic exposures to take advantage of the opportunities presented by long-term transformational megatrends, such as health care advances in areas like genomics or immunology, electric vehicles, or robotics.

At BlackRock, we believe strongly in the value that professionally managed active mutual funds can bring to investors as long as the managers are delivering strong performance relative to the fees the client is paying. This may be an opportunity to assess that performance and consider replacing underperforming fund managers, either in equities or bonds. Indeed, advisors can use suites of bond ETFs to build a fixed income portfolio in line with clients’ risk profile, all the while demonstrating value to the client.

Typically, financial advisors discuss taxes in the first quarter of a new year, leading up to April 15. This year, it should be top of mind for advisors and clients alike right now. After a very tough year, it could be a way to have clients close out the year in sounder financial shape, and better positioned for the challenges of 2023.

Armando Senra is head of Americas ETF and index business at BlackRock.