Bonds Trading At A Bargain Right Now? | Jim Masturzo

**Jim Masturzo** (0:01)
If there is no intervention, sure, rates can go out on the long end, no doubt. But do you really believe that we're just going to sit by, or the Fed in particular is going to sit by and let them, and just lose the long end of the curve? I don't see it. I think there are too many negatives for that happening, and so there's many, many interventionist type policies that they can take on to control that. So again, if nothing happens, we're very happy to clip coupons where they are. But the change in rates from our opinion is definitely skewed lower, not higher.

**Adam Taggart** (0:44)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Today's guest has a contrarian bullish view on bonds, especially when looking out over the next three to five years. While Consensus Stollion's cautious, his take is that this moment offers a rare setup for strong bond performance. Why? Well, let's ask the man himself. Today, we've got the good fortune to welcome to the program Jim Masturzo, CIO of Multi-Asset Strategies at Research Affiliates. Around $150 billion in assets are managed worldwide using investment strategies developed by research affiliates, so they have global impact. Jim, thanks so much for joining us today.

**Jim Masturzo** (1:25)
Thanks for having me.

**Adam Taggart** (1:26)
Hey, well, it's a real pleasure. It's your first time on the channel, so thank you for joining us. I have had your colleague, Chris Brightman, on the program before, a very sharp guy. Expect nothing less from you, so this should be fun. But since it is your first time, if I can just ask you an intentionally high-level question to kick things off here, just so folks get a sense for how you see the world, what's your current assessment of the economy and financial markets? Sure.

**Jim Masturzo** (1:54)
It's a great question, and I feel like this entire year, there's been a lot going on. Sometimes, you can ask this question, and things are a little less volatile, a little less going on, and the answer is, it's a little more boring. But with everything that's been going on really daily for the last nine, 10 months, there's a lot to think about.
If you asked me this question six months ago, what were we seeing? Well, tariffs were starting. We were starting to talk about tariffs. Bond yields were moving around. People were talking about the fact that bonds are risky, that the debt and deficit cycle had ramped up to an extent, not just in the US, but across developed markets where no one was going to want to hold sovereign debt anymore. We're going to have to go to all these crazy things to manage that. But what did we see? Well, except for a blip in April, US equity markets have continued to roll forward and reaching new highs. In Q1, and it's really continued, but mainly in Q1, we saw that in developed markets as well and emerging markets. Equities were doing well, but now we get to the point where, okay, now we're starting to feel the impacts of tariffs, and there's debates on how much of that is flowing through to inflation, and we can talk more about that. But we're seeing impacts from reductions in immigration, cracks in the labor force, those sorts of things. I really think we're getting to a point of, I don't want to call fragility as probably a word that's too strong, but definitely starting to see some cracks. And so, getting to that point where I think taking some risk off the table, not going full in, we're seeing it a little bit in equity markets over the last week or so. We're seeing it in crypto markets. The oil market obviously has been selling off for quite some time. So I would say, cautious to maybe slightly more than normal cautious.

**Adam Taggart** (4:03)
Okay. So this is a good segue then to bonds.
So, my question I want to ask you is, is, okay, so why do you think the market is currently too bearish on bonds? And it could be because the market is still too focused or has most of its focus on tariffs and what might happen inflation-wise going forward. But one could also make the argument, you know, for entering a point of fragility, then the odds of a safety trade start building, and maybe that's the core of your bond thesis. I don't want to put words in your mouth. So, why is the market too bearish on bonds right now from your perspective? And why are you more bullish?

**Jim Masturzo** (4:47)
Yeah, so, you know, it's funny, I think Fed bashing is like a sport that people have.