Photo: Bloomberg TV
For years, investors have watched in disbelief as the 30-year bull market in fixed-income assets has raged on, leaving bears in the dust.The bond sceptics are having another moment, as talk grows of a “great rotation” from bonds into equities, as rates finally start to rise, and the economy turns back into the old normal.
Dan Fuss of Loomis Sayles is the third bond fund manager to be called a “bond god” (the other two are Bill Gross and Jeff Gundlach).
He is strongly of the view that the current fixed income market is out of control, and that a reckoning is coming.
“This is the most overbought market I have ever seen in my life in the business,” Fuss, 79, who oversees $66 billion in fixed-income assets as vice chairman of Boston-based Loomis Sayles & Co., said in an interview in London. “What I tell my clients is, ‘It’s not the end of the world, but for heaven’s sakes don’t go out and borrow money to buy bonds right now.'”
“The world is changing,” said Fuss, who started in the investment business when Dwight Eisenhower was U.S. President. “We are coming off a period of very low interest rates because the central banks have been buying the bonds. Interest rates are going to go up.”
The idea of the bond bull run coming to an end is a bit more popular, it seems, within the equity side of the world, where analysts are (to some extent) cheerleading the shift from fixed income into bonds. That being said, Bill Gross has clearly been sceptical of the bond market for a while (having been burnt on a short in 2011).