Gerontocracy is much debated and decried in U.S. politics, and not without justification. Yet there is value in the wisdom gained from experience, especially from someone who puts the lessons of the past into thinking about the future. That future is fraught with risks, he offers, but not ones usually associated with investing.
More than the next gross-domestic-product or jobs number, Fuss expresses concerns about geopolitics, climate change, and domestic disputes that have hampered governance. Where once his speeches to groups such as the CFA Institute focused on things like Federal Reserve policy, the economic outlook, and the like, now he emphasizes what’s often seen as exogenous factors, away and apart from usual investment analysis.
Fuss’ worry about an expanded war in the Middle East joins his longtime concerns over conflicts between China and the U.S. creating a Thucydides’ Trap, when a rising power threatens to displace a dominant one, as well as Russia’s aggression against Ukraine. Fuss doesn’t necessarily see inflation soaring like it did in the 1970s, but he does think interest rates are likely to experience successive cycles marked by higher lows and higher highs. The implications for investing are likely to be the reverse of the experience of the past four-plus decades of disinflation and falling bond yields.
While Fuss is constrained from naming names, one example would be a triple-B-rated bond with a 1.5% coupon due in 2030, which would trade around 77 . That would result in a yield to maturity of about 5.80%, compared with 4.68% for a seven-year Treasury note.