Dan Fuss is the vice chairman at Loomis Sayles and Company. He is the former manager of the Loomis Sayles Bond Fund. He is 91 years old. He still works full days. And he’s never seen a stock and bond market quite like the one we have today.

I recently spoke to Fuss for an episode of my Money Life Podcast about his take on the Fed and its interest-rate policy and what bond investors need to take into account in their portfolios in 2025. I asked why when the Fed has been in a cutting cycle, mortgage interest rates and bond yields have risen and when we can expect normalcy to return to the market.

“It’s a different environment. People correctly are applauding the Fed’s action in here. Some people really disagree with me on that, but I think they’ve handled it very, very well,” Fuss told me. “But that’s not the big thing. And unlike, say, five years ago, the traditional way to discuss what’s going to happen with the bond market is superseded right at the start by three things that are happening.”

1. Climate change. “It’s had some impact on the financial markets. But what has changed big-time is the movement of world trade. Climate change is really starting to affect that, is affecting raw material costs. The key part of it is that there’s a lot of people movement taking place because of that and that leads to conflict.”
2. Geopolitics. “The extreme reactions that we’re getting in the geopolitical area, the stress level around the world between nations or groups of nations has risen and it’s actually been at a high level in the China-U.S. relationship, but it’s well recognized there. A lot of the books [have been written about it] that lay out how certain things apart from the economy continue to increase stress between nations. And with the current weaponry involved, that could be ‘Game Over’ for all of us.”
3. U.S. politics. “For U.S.-based investors, the uncertainty on taxes for both individual and corporate, the friction between political leadership groups at the national level is [something] that in my lifetime, or at least my adult lifetime, I’ve never seen anything like this.

Overall, Fuss believes the U.S. economy is in good shape, although the Fed will still have to be vigilant about a possible rebound in inflation.

“So what do I tell a new client who comes in these days? I say, right now, on the fixed income side, on the bond portfolio, we’re at a neutral area. And as this process goes forward, depending very, very much on the geopolitics, unfortunately, also the trends in weather, we’re probably going to look at somewhat higher interest rates,” Fuss said. “But the uncertainty in the geopolitical area and in our own political area are the big uncertainties. It’s not the economy. It’s not pricing in the markets. It’s more that overview point.”

“I’ve been doing this a long time now, over 60 some years, I guess, getting close to 70 years. And this geopolitical side really, really worries me, not taking the climate thing serious enough. And then, you know, right now for the moment, at least we’ve got in the U.S. we’ve got to worry about our own political cohesion.”

Listen to the full interview with Dan Fuss

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