One of the world’s most famous and venerable fund managers, Daniel Fuss, vice chairman of Loomis, Sayles & Company, recently spoke out against government bonds amid a litany of geopolitical uncertainties.
Fuss, 83, has been in the finance game a long time. And he’s never quite been this cautious on the bond market as he is right now. From Reuters:
“Have we ever been this cautious before? Not recently,” said Fuss, who started his career in bond investment in 1958. “In my early days in the ’60s and ’70s, a certain amount of caution periodically was helpful,” said Fuss.
Fuss said his Loomis Sayles Bond Fund has responded by dumping longer term bonds for those with a much shorter duration. The average maturity of the fund’s holdings has plunged to 6.5 years presently, down from 13 years.
The manager made the move to limit what he perceives as major risks stemming from political uncertainties:
“The uncertainty is very high. For instance, if U.S. policy becomes unfriendly to Mexico, then the U.S. economy will have a huge problem,” he said.
Fuss also believes the Fed when it says it will bump up rates several times this year, reversing his prior skeptical view:
“Earlier, I didn’t think there will be three hikes this year but now it looks likely,” he said.
As of the end of 2016, Fuss’ company counted over $240 billion in assets under management, so it pays to listen when someone of his stature speaks.
And right now, he’s saying to be very careful with bonds.
The iShares Barclays 20+ Year Treasury Bond ETF (NASDAQ:TLT) fell $0.02 (-0.02%) in premarket trading Monday. Year-to-date, TLT has gained 0.17%, versus a 6.37% rise in the benchmark S&P 500 index during the same period.