A recent article in Advisor Perspectives offers market insights from Dan Fuss, vice chairman of Loomis Sayles, who argues that climate change is now “the greatest challenge facing society and the markets.”

According to Fuss, policymakers are trapped by a “two-step environment” in which climate change must be addressed but global policies must be put in place to address it. Climate change, says Fuss, has caused vulnerability in the global supply chain.

Other market insights Fuss shared include:

• “The U.S.-China relationship is the dominant theme for markets,” but there are other geopolitical tensions at work, including net asset flows to the U.S. and Europe from Asia driven by “political disorganization and regional clashes.
• “Migration from the Middle East has driven a lot of political tension and “alters where we put our money in the Loomis Sayles bond fund, to avoid unstable regions.”
• The uncertainty created by global polarization increases investment risk.
• Regarding the economic environment, Fuss says that the manufacturing regions in the U.S. have weakened, adding that the biggest issue is “trade fear.” He says, “Anyone would be foolish not to take into account that the flow of trade could be halted or slowed.”
• Regarding monetary policy, Fuss noted the evolution from a primarily domestic-oriented to a global perspective, adding that central banks are aware of this and have a global focus beyond their normal targets of price stability and low unemployment.
• Fuss says that environmental, social and governance (ESG) issues are playing a bigger role in his investment decisions, adding that he wants to invest in companies that are trying to solve climate-change-related problems.
• In the current late-stage environment, Fuss says, “We won’t make a lot of money,” adding” but don’t say that to clients.”