Howard Marks: Markets Went From All Good to All Bad

The Oaktree Capital leader offers his ever-nuanced views on how to invest in this difficult market

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Oct 22, 2018
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Howard Marks (Trades, Portfolio) appeared on Bloomberg on Oct. 21. He offered some nuanced commentary on the recent market turmoil. As it often does, the market turned from "all good to all bad." Marks also explained how Oaktree is investing in this difficult environment. You can watch the full clip below.

No one can tell Marks to his satisfaction how quantitative tightening will go. It has never been done before, so we don't know how it will go. As part of this process, rates will go up. The Federal Reserve is likely to increase rates five or six more times. Fixed income will also become more competitive to stocks.Â

The current climate is an example of how short-sighted markets are. Investors have been forward-looking and in a good mood, ignoring information that should have prompted them to discount future cash flows negatively.

Will there be a recession soon?

Our economy is still doing well. There are no signs of recession. In a few months this will be the longest recovery ever. The fiscal stimulus certainly played a role.

Emerging markets

These have been some of the worst-performing groups in the global markets. Oaktree doesn't buy just because things have gone down, but it is a great starting point to begin looking.

No crash

People who came into this business in the last 20 years have seen two bubbles burst in 1999 and 2008'. But markets can move sideways for long periods of time without crashes. People forget that, but it's a possibility. Marks doesn't see things that are as wrong as they were in these periods.

How is Oaktree investing?

  • They invest every day.
  • They are not going to cash.
  • They are a cautious fund, but are even more cautious today.

In investing in every class, there are ways to do it in an aggressive way and a defensive way. Example: If you want to invest in a high-yield bond fund, you look for a manager that manages downturns well.

Disclosure: Author is long Oaktree Capital (OAK, Financial).Â

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