Great Bond Investor

A 75 basis point rate hike, the largest since 1994 by the Fed this week.  Doesn't that make this a great time to be thinking about bonds again?  That's exactly what Consuelo Mack does in this week's edition of the PBS WealthTrack program in which she interviews one of the industry's most successful bond investors, Mary Ellen Stanek of Baird Advisors.  Hope everyone had a great weekend.  We're heading for some more big heat starting Tuesday.  

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Sponsored by: June 16, 2022 Dear WEALTHTRACK Subscriber, 75 basis points: the biggest rate hike by the Federal Reserve since 1994 with additional aggressive moves expected. It looks like Fed Chair Jerome Powell is proving the naysayers wrong, who doubted he had the stuff to fight inflation. As influential Fed watcher Paul McCulley told WEALTHTRACK months ago Powell will “do whatever it takes” to fight inflation, just like Paul Volcker did in 1979/1980. Volcker succeeded, setting up conditions for the great bond bull market of the last 40 years but caused a serious recession to do it. How do you feel about bonds now with interest rates ratcheting up? If you took most strategists’ advice in recent years, WEALTHTRACK guest Jeremy Grantham included, you would have shunned them. Interest rates had fallen to historic lows pushing bond prices to historic highs. The two move inversely. As a result, bonds were dubbed the most expensive financial asset, the biggest bubble of all.   That bubble has popped.  Bonds had their worst start to any year since data began in 1976.  A four-month stretch of declines sent the benchmark U.S. Aggregate Index down 9.5% through the end of April.  How do you manage through a cycle of rising interest rates and higher inflation? There aren't too many money managers who have that experience and have a track record of excellence through many different types of markets. This week’s guest does. She is Mary Ellen Stanek, Co-Chief Investment Officer of Baird Advisors and President of the Baird Funds where she heads up the fixed income team, overseeing $118.8 billion in fixed income investments.  Stanek was recently named Morningstar’s Outstanding Portfolio Manager of 2022 for her “disciplined and risk-aware approach, thoughtfully navigating various market environments,... and generating impressive absolute and risk-adjusted returns” in her 22 years at Baird.  Stanek is Lead Portfolio Manager of the Baird Aggregate Bond Fund rated five-star, gold by Morningstar and Baird Core Plus Bond Fund rated four-star, silver.  Both funds have beaten their benchmarks since their inception in 2000 and in multiple years in between.  I interviewed Stanek a few days before the Fed meeting but she was prepared for it. We talked about the need for the Fed to get more aggressive in word and deed - which they did, where we are in the interest rate cycle - early days yet, and why she says “bonds are back!”  In this week’s EXTRA feature, Stanek explains Baird’s “Servant Leadership” mentality and why it is paying big dividends for the firm. If you miss the show on public television, you can watch it on our website over the weekend. You can also find the WEALTHTRACK podcast on Stitcher and SoundCloud as well as iTunes and Spotify. Have a wonderful Father’s Day weekend! I miss mine every day. Make the week ahead a healthy, profitable and productive one. Best regards, Consuelo