Bond veteran Dan Fuss has been through some rocky times in his 57-year career but says the recent market period he's lived through has been the most ‘draining’ since the Watergate scandal in the early 70s.
Fuss, manager of the $15.4 billion Loomis Sayles flagship global bond fund, speaking at a press event said: ‘In the fixed income markets, and to a degree in the equity side in the US, the market from July 2014 up to this February this year has been the longest, most draining type of market that I have encountered since 1973/74.’
The bear market between January 1973 and December 1974 was associated with the Watergate scandal, which saw US president Richard Nixon impeached, US dollar devalued and an oil crisis.
‘[That period] was just god awful in the US market. In 1973 it was a normal down market and then a rally and it slid day after day after day… this one is obviously different from many respects but it’s draining,’ said Fuss.
‘It’s been particularly hard in the value area, in both stocks and bonds but in bonds especially because of the nature of liquidity in fixed income.
‘Liquidity in fixed income has really aggravated this setting. In those days there was no liquidity in the fixed income markets to begin with so that’s a change,’ he said.
Fuss added that emerging markets have been very hard hit and this is where the tough questions are coming up.
In February Fuss wrote to investors calling for patience as his team’s main strategies endured a period of ‘short-term pain’ caused by wider market uncertainty.
Turning to the Federal Reserve's rate hike plans, the bond manager said that if the Fed decides to act this year it will have to do so before the US presidential election in November.‘Doing nothing is doing something. My guess is that the safest thing to do is to hold back…I don’t think they want to raise rates prior to the election but they may have to go up once,’ said Fuss.