Mr. Dan Fuss Presented the “4 Ps” and his Bond Market Outlook to the Milwaukee CFA Society

Dan Fuss, Distinguished Marquette Alumnus, Spoke at the CFA Society of Milwaukee Luncheon on January 11, 2017

On Wednesday, January 11, 2017, the CFA Society of Milwaukee hosted its annual Dan Fuss luncheon event at the Milwaukee Athletic Club. Similar to past presentations, Mr. Fuss spoke about his “4 Ps” and gave his bond market outlook.

Mr. Dan Fuss with the Marquette AIM students

Daniel Fuss, CFA, is the vice chairman of Loomis, Sayles & Company and manager of the Loomis Sayles Bond Fund. He has won numerous awards for his outstanding performance as a fixed income manager and SmartMoney magazine in July 2008 called him one of the world's best investors. He earned his bachelors and MBA degrees at Marquette University and he is a former U.S. Navy lieutenant. Dan Fuss is one of the early supporters and advocates behind Marquette’s Applied Investment Management (AIM) program.

Dr. David Krause, AIM program director, and over a dozen Marquette students attended the event and enjoyed meeting with Mr. Fuss afterwards. Dr. Krause said, “Earlier in the day on Bloomberg I watched Bill Gross and Jeffrey Gundlach talk about the bond market and both were referred to by the TV analysts as “bond royalty.” However, to many of us who follow the fixed income market, the real “bond king” is Dan Fuss, whose tenure in the fixed income market has spanned more than 50 years. After hearing his talk today and getting to spend time with him, I can say that Dan is on top of his game. The same way that Warren Buffett has a special sense for the stock market, Mr. Fuss displays the same clarity regarding the global bond market.”

Dan Fuss Presented to the CFA Society of Milwaukee

Dan Fuss indicated that the cycle of low interest rates and low inflation appears to be coming to an end and he was clear in stating that “both will rise and that is not a good combination for the bond market in the short-term. It appears that we are moving back toward a more normal condition, which isn’t a bad thing.” 

More broadly, he talked to the audience of nearly 200 CFAs and investors about the bond market – and like past years he framed his talk around the “four Ps” – peace, people, prosperity, and politics – in addition to commenting on the role of central bankers and changing weather patterns.

Similar to past years he began by talking about “peace” - or its absence. He is worried about events and developments in the Middle East, terrorism, immigration and events unfolding in the South China Sea.

Fuss’ “prosperity” concerns related to the possibility of tariffs and increased defense spending. He was optimistic about increased fiscal spending on infrastructure and the possibility of lowered  U.S. tax rates, which could boost GDP and lead to increased inflation – especially wage push in certain fields (e.g. medical technology) and regions (East and West Coasts).

Regarding “people,” Mr. Fuss noted the polarization of political parties in the U.S. and Europe, as well as the aging and declines in developed country populations. He noted that these changing demographics will favor bonds over stocks in the long-term.

Dan Fuss commented on the political issues in the developed economies and noted the potential for a movement away from globalization – which he viewed negatively.  He cleverly avoided any direct discussion about the new U.S. President-elect's campaign promises.

Regarding central banks, Mr. Fuss indicated he believed the Federal Reserve had laid out a clear rationale and agenda for future rate increases – and commented that he felt the other central banks would follow suit, but lagged by a few years.

His comments about climate change and the emergence of extreme weather patterns were a new angle that he had not mentioned in previous years. Fuss noted that he felt it was important to study global supply chains to assess the impact of potential increased tariffs and long-term weather changes.  

While his forecast for the bond market in 2017 was less than rosy, he did suggest that it would be good in the long-term for pension funds, foundations and endowments as we return to more normal interest rate levels. He suggested that the wildcard remained geopolitical events.

Dr. Krause said, “It is amazing what Dan Fuss remembers. He has managed through numerous bond-market crises and his experiences provided the students in attendance with useful advice and guidance. We look forward to his return to campus next year to meet with all of the students in the AIM program – which he helped create in 2005.  It was a great afternoon with Dan Fuss.”