In his latest Q32022 Roundup, Howard Marks explains why blanket advice to buy or sell isn’t very useful. Here’s an excerpt from the roundup:
Marks: Determining the appropriate risk posture for a given point in time is more complex than most people think. There can’t be a right answer for everyone. There can’t be a right answer for every asset class. If pundits say “Buy,” you should ask, “Buy what?”
And at the time that you’re supposed to buy, is there anything you should sell (or anything you should buy if it’s time to sell)?
Doesn’t it depend on individual risk tolerance? Doesn’t it depend on how people are positioned at the time? If someone’s portfolio is very liquid and a commentator concludes that it’s not a good time to own assets because the macro outlook is poor, might the investor already be in the right position for the future? Blanket advice to buy (or sell) isn’t very useful.
We know what has happened in the macro environment and what is happening today. We know what most people think will happen in the macro environment moving forward, and we know where security prices are today.
What we don’t know is how much of what we think will happen in the macro (or what others think will happen) is reflected in today’s prices. Since future conditions (as opposed to present conditions) may already be incorporated in prices, a poor macro outlook isn’t necessarily synonymous with prices declining, and a good macro outlook needn’t be synonymous with prices rising. Investors should be wary of sweeping generalizations about whether it’s time to buy or sell.
You can read the entire OakTree Q32022 Roundup here:
The Roundup: Top Takeaways From Oaktree’s Quarterly Letters – 3Q2022
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