In his interview earlier this year with Nikkei Money, Howard Marks explained why the most likely result will be a recession. Here’s an excerpt from the interview:
Marks: The easy money policies of the central banks over the last global financial crisis have created strong economic growth in many parts of the world, and rising asset prices. But the very strong stimulus engaged in in the pandemic has introduced inflation. And the world wants to combat that inflation now with tighter money, quantitative tightening, interest rate increases, shrinking of the Fed balance sheet, all of these things imply slower business. And most programs of tightening have produced recessions, historically.
Now there are some conditions… the consumer in the U.S is in very good shape, and thus there may not be a recession but I think that you have to worry about it if you are given to these things.
And so the most likely result will be a recession and higher interest rates, and recession generally should result in lower asset prices and this is the reason for my defensiveness, but I’m not highly confident that that’s going to be the case.
You can watch the entire discussion here. Click on the ‘Watch on YouTube’ link (6:53):
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