Dan Fuss Warns of Geopolitical Risks and Higher Rates
Dan Fuss has established himself as one of the most respected bond investors in the industry over his 60-year tenure. In a talk last week, Fuss warned investors of geopolitical uncertainty and higher rates in credit markets.
Fuss spoke on October 12 at the CFA Institute’s fixed-income conference in Boston. Fuss is vice chairman of Boston-based Loomis Sayles and manages the firm's flagship Loomis Sayles Bond Fund (LSBDX).
Dan Fuss has spoken regularly at CFA luncheons, but last week he warned that what he had to say would be markedly different.
Opening his presentation apologizing that he didn’t have better news, Fuss said “this isn’t a real cheerful forecast.”
“I normally tell funny jokes that have everybody clapping and cheering and running off to buy bonds,” Fuss said with his signature light-hearted tone. “That’s not what this is. This is not one of those times.”
I’ll look at Fuss’ comments on the global economy and bond market, and at his assessment of some asset sub-classes within the fixed-income universe.
The four Ps
As is his standard practice, Fuss reviewed the global landscape through his “four Ps”: peace, people, politics and prosperity – and a fifth dimension he introduced a few years ago – the role of central bankers.
While Fuss cited concerns about peace – or lack thereof – it did not dominate his thinking as it did in recent years.
Fuss’ statements about peace were consistent with the points he made in his previous presentation at this conference, two years ago. Namely, he is concerned about developments in the Middle East and in Eastern Europe, and his greatest fears continue to be the developments in the South China Seas.
However he spent little time on this dimension and only introduced one new concern – conflict with North Korea.
Similarly, he breezed through his discussion of people, only briefly citing two sources of change – shifting demographics and the displacement of populations.
Instead, he focused on the recent major movements of people around the world within the context of politics.