Sign "O" the Times

Veteran bond trader Dan Fuss is getting worried:

“I’m looking at the risks around the world and I’m looking at the direction they are going and I’m saying ‘this is really truly not good,’” Fuss said. “And then I’m looking at the markets and I’m saying ‘this is really truly full valuation.’ And so what’s the prudent thing to do? Well the prudent thing to do in the case of the Loomis Sayles Bond Fund is to say, ‘okay let’s get that liquid reserve up.’”

The rising prices on credit have pushed yields sharply lower on all sorts of debt, making it more difficult for investors to find securities that provide substantial income. Bond yields across the world have been hitting record lows, from U.S. junk bonds to German government debt. The silver lining for investors is that when the market is this expensive, you don’t lose as much by sitting out a round, says Fuss.

“I think it is a very good time to be cautious,” he said. “You have growing geopolitical risks and you have shrinking incentives to invest.”

I’d have added emphasis to those last four words, but would you really need it?