Loomis Sayles is finding value in energy-linked stocks and bonds, especially from Latin American countries Brazil, Colombia and Mexico.
Portfolio manager Andrea DiCenso, speaking at a Loomis Sayles media event, said that oil prices are likely to continue climbing and that, combined with falling inflation rates, makes some emerging market countries more attractive than their domestic counterparts.
She said that oil prices are likely to continue climbing as production in Venezuela continues to fade and tension between Iran and Saudi Arabia escalates.
‘Under the scope of a potential uptick in energy prices in the coming months I think Brazil, Colombia and Mexico, which has been punished because of Nafta talks, continue to offer value,’ said Dicenso, who co-runs the Loomis Sayles World Credit Asset fund.
Russia is also looking cheap, though risky, she added, after recent sanctions on some Russian oligarchs and government officials announced by the US Treasury on Friday.
Dicenso also said while emerging market prices are reflecting volatility and flows properly, she questions whether the same is being applied to developed markets.
‘Are investors properly pricing risk for developed markets? As we’ve seen this uptick in volatility, is that actually being reflected in the correct way?’
Avoid making a Fuss
Veteran bond manager Dan Fuss voiced his concerns over geopoliticals risks going forward. He said that the 10-year Treasury yield could go ‘north of 4%’ within two years, but only if there are no major geopolitical or domestic disruptions.
‘If things stay calm, or relatively so, geopolitically, and things go along peacefully, then we are in probably a fairly long period of time of rising rates,’ Fuss said. ‘But that’s a “huge if.”’
The 10-year Treasury rate was as high as 2.9% in mid-February but has fallen to around 2.8% on the back of increasing political tensions like most recently, President Donald Trump’s calls to strike Syria in light of a recent chemical weapons attack.