PM Campe Goodman will address some of the biggest fixed-income questions financial professionals are hearing from clients today: whether now is a bad time to invest, if inflation remains a major risk, and should they stay in cash.

For more insights on today’s fixed-income market and resources to support client conversations, visit hartfordfunds.com.

Campe Goodman is not affiliated with Hartford Funds.

I'm John.

And I'm Julie.

We're the hosts of the Hartford Fund's human-centric investing podcast.

Every other week we're talking with inspiring thought leaders to hear their best ideas for how you can transform your relationships with your clients.

Let's go.

Campe, welcome to the Human Centric Investing Podcast. We're so excited to be here with you today.

Thanks, Julie. It's great to be with you today.

So Campe, there isn't much happening in the markets these days, so Julie and I don't really have much to talk to you, I'm just kidding. So when it comes to fixed income, Campe, and we'll talk about maybe some historical references as we record the podcast today, but it seems we've been in a rising rate environment for what seems forever now. I'm sure it's not forever, but to investors it may seem like forever, But I guess the question to you is, you know, Is it a good time to be in fixed income? And I'm assuming your answer is gonna be yes, but I'm really interested in your reasons why.

Yeah, well, thanks, JD. It's a great question and one I've gotten many times, including just this morning. So yes, I do think it's a good time to be in fixed income. And I understand why it feels like we've been in a rising rate environment forever. But really, the way I think about it is we had a horrible year in 2022, basically. Sort of end of 2021 into sort of the. Third quarter of 2022, and for understandable reasons, it really traumatized a lot of investors. But since then, actually, fixed income has done pretty well, and it's a combination of higher yields and a more stable inflation environment that has actually made it a pretty good environment to be in bonds. Now, this year, again, we're getting worried. We've seen a tick up in inflation. We've seen rates move up, the 10 years moved up. About a half a percent so far this year. And I understand investors are getting nervous, but to me, actually, the start of this year almost tells you why it's not going to be a repeat of 2022. And first of all, we're just, we're starting from higher yields. So even though we've had this significant move up in rates at the beginning of the year, like the major bond indices are around flat, they're around zero, they're not down in a five or 10% like they were a few years ago. That is partly because we're just, we're starting from higher yield. So you're getting income. You have that at your back. And the second major difference from a few years ago is the inflation that we got back then was really, really shocking. But this year, even though we have experienced not a great inflation environment, we had a meaningful inflation shock, it's nowhere near like what we experienced a few year ago. So I'm really trying to encourage investors to think about this as being a much more benign environment and take advantage of these higher yields and think about starting to invest in fixed income. I really believe that's the right thing to do. It is what I'm doing myself as well.

Campe for our financial professionals who are listening, how would you suggest they converse with clients who really are more comfortable sitting in cash right now and don't wanna take on additional risk? Do you have some talking points for them as they continue to engage in conversations and try to encourage them to be back in the markets?

Yeah, look, I mean, I think that I understand why clients want to stay in cash, but you're just not getting very much income by sitting in cash. You are losing out, and this is what I've been telling clients again for a few years here. Every time we have a really strong sustained run in the equity markets, it's like people just forget that equities can ever go down, but eventually they do, and that's... Healthy, but a little scary when it happens and you want your fixed income to serve as that counterbalance to your equities. And again, it didn't do that in 2022, but almost every other time that we've had a big sell off in the equity market, it has. And I think there are good reasons to think that this time around it will. If we have a sell off that's driven by, oh, you know, I don't know, maybe some disappointment around AI or something like that. Not saying it's going to happen, but it's a possibility. What's the Fed likely to do? They're likely to have space to lower rates. So I really want to encourage clients and financial advisors to think about fixed income as being that counterbalance to their equity risk that it has in advance.

So, Campe, you mentioned 2022 a number of times, and I guess my question for you is, what is the biggest difference, would you say, in the environment today versus the environment in 2022? Because I'm sure many of our listeners kind of have shock, right, when we think about, oh, I've seen this before, I know what it felt like, but are we, in your mind, are we in a kind of a different environment as we started. 2026.

Yes, higher starting rates and a more benign inflation outlook, and those are just really important differences. I also do think that we have central bankers that are aware, have learned lessons from their mistakes and aren't going to allow 2022 to repeat itself. So yes, it is a different environment. I think that's really important.

Campe, where are you finding attractive opportunities today as we sit here?

So, you know, Julie, I think this is something the other question that I get a lot is, you know, gosh, you know, is there anything that that looks attractive and that isn't really expensive right now? And fortunately, the answer is yes, I see some of the same, just to start with what is expensive, because I actually think that's maybe a good place to to anchor us. You know, I see some of the right now. So in US investment grade credit. Much of U.S. High yield, they're pretty expensive. Like credit spreads are on the tight side. You're not getting a ton of value there. But I do think that there are other parts of the market that are cheap. So I would name parts of the structured finance markets, particularly what we're seeing is some of the areas that are tied to residential real estate or tied to commercial office buildings. Those areas are. Relatively attractive because investors have concerns about still about how office property is going to do looking forward. So I think those areas look good. And then there are other types of securities that are linked to consumers where, again, the market is worried about the U.S. Consumer and I would say overly worried. There are great opportunities in those areas. So that's one thing. A second area that I would highlight that I really get excited about is emerging markets, particularly emerging market corporate debt. So what's great about buying companies in emerging markets is you can often find companies that have very good balance sheets, very stable cash flows. So to give a couple of examples, things like banks, telecoms, they're often doing fairly boring things. They're just, I like to say, doing them in interesting places. And so... You know, I love finding companies that have good balance sheets but are located in countries maybe that investors worry a little bit more about. And so those are really attractive areas. You just have to look a little farther afield. I would also say that, you know, increasingly we are seeing opportunities even in the U.S. In technology. So, you know, there was a real concern earlier this year. You know, that we had the SaaS-pocalypse, the big concerns that any company that was engaged in selling software as a service, you know its business model was going to be challenged by AI that all of a sudden, like we were all gonna go out and write our own software and that we weren't gonna need these companies anymore. You know, I think those concerns were, you know it almost sounds silly when I say it, but you know there was some legitimate concerns. There are some companies whose business models are actually going to challenge. But it's not all of them. In fact, some of the companies that are best positioned to write the next generation of software using AI are the companies that are selling this generation of softwares. And so the ones that are smart, that can adapt and that can use AI are gonna be the ones that I think we want to invest in. And so as a lender to different companies, like that's something we've really wanted to look at is in technology to find, to separate the winners from the losers. You know, again, it's a great environment. I've rarely been in an environment where like the average spread is tight, but there's as much dispersion as there is today. That's really shocking to see. And it makes actually for a really fun environment to be investing in.

So, Campe, I know you recently published a piece with Hartford Funds talking about two forces that right now are shaping credit markets. One is the Iran conflict, because as we speak, the conflict or lack of conflict is still going on, but something's still going on in the Persian Gulf. And the other is something that I never really thought about in terms of impact on fixed income. But the AI investment boom, and the impact that that actually has on fixed income markets, not just equity markets. So if I could ask you to comment on each of those, just in terms of their impact on really the fixed income landscape.

Well, JD, I think in the short term, the Iran war is the one that we should be focused on because that's really what is driving the changes in rates day to day here as markets gyrate and get concerned about, you know, are we going to see another spike in oil prices? Are we going see big supply changes, continuities and things like that and, you know, the effects that those things could have on, especially on prices, but also on growth. So. Look, if the war were to if we were to reach a really conclusive resolution, you know, tomorrow or whenever we do and the Strait of Hormuz, you know, eventually, we hope gets reopened and some of things these things settle down, you know, I do think like oil prices will come down, rates will be somewhat lower, we'll be back to probably where we were, you know, a few months ago. Little bit with the 10-year rate a little bit over four or close to four. So it would be really good for the fixed income markets for this conflict to be concluded. And eventually, I think that's what will happen. But that's certainly the intensity of this conflict is going to drive the markets. And the longer that it continues, the more challenging it will be for rates to come back down because it is pushing inflation up right now. But I do see it as temporary. It's something that I think will end within the next, let's say, three to six months. AI is really exciting and a really big deal and going to be a much longer lasting effect on the economy and on the fixed income markets. And look, it affects the markets in a few ways. The first thing is that from a productivity standpoint, just as thinking about this economically, it should be a real boost to productivity. It should mean somewhat higher growth. In the near term, it does mean a lot more investment. It means more jobs, it means more building. And so in those ways, it certainly probably means higher real interest rates. What exactly it does to inflation and nominal rates is a little trickier to figure out. But I think it probably means that, it's overall, it shouldn't have a big, it should be potentially good for inflation. It should mean that we're more productive and inflation could potentially be lower in like the two to five year span. That's why I'm saying it's sort of looking farther out. But the other thing that it really matters to right now is there's just massive demand for capital. And that demand is not just coming from the equity markets. That demand is coming significantly from the fixed income markets. And I do think about like past major investment booms that we've had. And when that has happened, it has generally led to somewhat wider credit spreads. And so, you know, we've seen some of that already, like a number of these, that the credit spreads on these hyperscalers and the debt that they're trying to raise, like that's already repriced. So the good news is that I think that for many of these companies, Just like. We're actually getting some really good investment opportunities now, like a lot of the repricing I think has already happened. And so it's a good time to be looking at opportunities. And we've done that. We've taken advantage of some of the recent issuance and bought some of it. And almost immediately, like even within a period of a couple of weeks, we've seen some of that tighten right in and then we've taken an advantage of that. So, you know. There's this longer term effect, there's just massive demand for capital, and then there's sort of this short term like widening in credit spreads that we've seen. So yeah, it's having big effects on the markets, it's going to continue to. Ultimately, I'm pretty bullish about the effects that this is going to have on the economy and what it's gonna mean for our growth, but as with anything like this, there are gonna be periods when we're really excited about it, and then periods when we get a little more. When expectations get ahead of reality is the way I might put it. When people are this excited about something, it's sort of easy to disappoint at certain times. And so it's going to be a bumpy

Campe, I know many of the themes that we've touched on today are frequent inquiries that you receive from financial professionals when you're chatting with them. I'm curious, what is a question or a theme that you aren't asked as much as you wish you were because it's important information that you want to be able to share?

Yeah, look, I think, Julie, what I'd say is that I don't hear as many questions about emerging markets, and you know, we did talk a little earlier about how excited I am about some of the opportunities there. I would really come back to that as something where I'm interested in the fact that clients are not asking me that much about other countries, and especially about EM, because we're very focused on the U.S., and you now, this is. This is somewhat evergreen, right? Like US investors are always focused first on the US, but I think it's been particularly true over the last few years. Investors have gotten a little frustrated with the returns maybe that they expected out of emerging markets over the past decade and didn't get. And so that's an area that I think there are lots of good opportunities and where I would encourage folks to consider looking. You know, I would also say like. Um You know, I think a lot of investors are maybe thinking that they just want to stay invested in the US because, again, as they look back, the dollar has been very strong. And so it really hasn't made that much sense to go beyond the US. But I would encourage investors really think more broadly, look at other countries. There are lots of great opportunities. And I think that. There's a good chance that other regions outperform the US overcoming years. And that's not because I'm worried about the US but just because I think things get a little bit, people get too excited about one area and maybe they're too excited about the U.S. Right now.

So Campe, coming back domestically again, thinking about, you know, many of the clients of the financial professionals that are listening today, how should they be perceiving inflation? What's your assessment? I know nobody has a crystal ball, but your assessment of inflation risk today, and I guess I'll throw a part B on that, is that we have a fairly new Fed Chairman. How do you feel those dynamics are playing out? How does that factor into your whole expectation of inflation?

Yeah, okay, JD, it's so important to talk about. Look, I do think that inflation is going to be higher over the next 10 years than it was over the 10-year period up to 2022. So we had a decade of really exceptionally low inflation where we were between zero and two, and it almost seemed like no matter what we did, it was going to stay there. That's not normal, actually. You know, I mean, like, many of us have been doing this for longer than that period. And we remember that, like that's actually, that's more the exception than the rule. And so I think many investors who maybe haven't been in the markets as long are really anchoring to that period and thinking that we're gonna go back to that. I don't think that's right. So, you know, inflation in like the two to three, three and a half percent range, That's where I would expect it, and that's OK. I mean, that's where we are. In terms of the Fed and our new Fed chair, I'm actually pretty optimistic about how he's going to react. I think what we've seen so far is a Fed chair who is pretty orthodox in what he does. He's frankly, I think, a little more ordinary than maybe we feared. I almost joke that I think that like. Within a year our president may be really angry with him for being kind of so such an orthodox, you know Sort of normal type of central banker You know recently he had one press conference that I think didn't go the way that he wanted to and he's needed to course-correct again that you know, those of us who have seen many Fed chairs know like Particularly when you're getting started you don't get it all exactly right I mean none of us do and we're when we're just speaking off the cuff. It's very hard to do so I think he misstepped a little bit, but I don't think that he's going to be anything other than a pretty ordinary central banker. And to me, as a bond guy, that's a high compliment, actually. Makes sense. Thanks.

Campe, you've talked about finding opportunities by looking past the headline numbers. What does off the beaten path mean in fixed income right now? And where are you seeing some examples of that as we sit here today?

Yeah, look, I think right now, Julie, that looking off the beaten path can mean looking at things like banks in Eastern Europe or telecoms companies in Southeast Asia or in Africa. It can, again, it could mean things like, you know, software companies that the market is extremely concerned about. It can be in looking at. European property companies, you know, I think there are lots of great opportunities out there And really like that's where we want to be looking rather than just trying to make one big market call and saying like You know, oh, you no credit spreads are tight. They've got to widen or you know Rates are I've got two go up or down or things like that. Like, you you know Everybody wants to talk first about you know like some big move that they expect in rates or equity markets or things like that. But there are just so many great opportunities. Again, I would just come back to this idea. There's so much dispersion right now in markets. I think it's really a lot of fun to be on the hunt for ideas.

Well, Campe, if there were one or two things that the financial professionals who are listening to our podcast today that you'd like them to take away from our conversation that you think are really, really important that they share with their clients, what would those couple of things be in summary?

Well, first of all, I would say to the financial professionals, thank you for listening. I really appreciate taking the time to do that because many of us listen to a lot of podcasts and you have your choice. But what I would hope that you would take away from this is that really it's a good time to be in fixed income. And again, I will just say, the second thing I would I would just say is just, there are really great opportunities out there in markets. You know, the headline, sort of. The index level spread numbers really mask a lot of what's going on underneath. There are parts of the market that are significantly wider and significantly tighter than those averages. And so I really would say that we're finding that it's a good time to be looking for ideas.

Well, Campe, there's a couple other takeaways that we want the audience to take with them as well. And they come from what we call the lightning round of questions. And this is where we get to ask our guests, like nothing to do with fixed income markets, but everything to do with Campe Goodman as we ask you a series of questions just about yourself so that you can share with our audience a little bit about who you are. And we'll do that through these goofy questions yet that we ask. So if your game.

Yeah, JG, I feel a lot more comfortable talking about the bond market than about Campe Goodman.

Exactly. But let's do it. Then I'll let Julie fire away.

Perfect. Campe, if you could instantly master one skill, what would it be?

Oh my gosh, I would love to be able to play the guitar.

All right, Campe, here's a tough one. What's your favorite ice cream topping?

Oh, um, my favorite topping, I like just chocolate sauce.

John: Me too. I'm a purist.

Campe, what's your superpower in one word or phrase?

Calling together a lot of ideas from my colleagues into one good investment idea.

Julie: That's great.

All right, Campe, if you had a time machine that you could jump in for one trip, when and where would you go?

Honestly, if I could do just one trip, it would be to go forward in time and see my future, hopefully grandchildren or great grandchildren. I’d love to know them.

John: That's awesome.

Julie: That is amazing. Incredible. What's the first concert you ever went to?

Uh, first concert was the REM green tour.

How about, what's your favorite season of the year and why?

Favorite season is summer. I just love being outside.

What's one thing people would be surprised to learn about you?

That when I was younger, I taught horseback riding.

Julie: That's awesome.

Well, while we're on the animal topic Campe, are you a dog person or a cat person?

I'm a dog person, had dogs all my life.

Are you a fan of a paper to-do list or a digital one?

Digital, because then I carry it around and actually get it done sometimes.

All right, Campe, my last question. This could be a tough one, or it could come instantly. What is your go-to karaoke song?

Oh, uh, it would have to be living on a prayer

Perfect. So good. When you were a kid, what did you want to be when you grew up? When I was a kid I wanted to be an astronaut.

Mm-hmm didn't seem likely unless at the time unless you had 20 20 vision, but you know That's all right

Well, Campe, we can't thank you enough for joining us here today on the Human Centric Investing Podcast and sharing your insights. And for our listeners, if you're interested in learning more about Campe's resources to support your client conversations, please feel free to visit harfordfunds.com. Thank you again, Campe.

JD, Julie, thanks, this has been a lot of fun.

Thanks for listening to the Hartford Bunds human centric investing podcast. If you'd like to tune in for more episodes, don't forget to subscribe wherever you get your podcasts and follow us on LinkedIn, Twitter, or YouTube.

And if you'd like to be a guest and share your best ideas for transforming client relationships, email us at guestbooking at HartfordFunds.com. We'd love to hear from you.

Talk to you soon. The views and opinions expressed herein are those of the guest who is not affiliated with Hartford Funds.