Howard Marks is one of the most insightful voices in investing. He recently spoke at Moneycontrol GWS 2025, discussing market behavior, cycles, and investor psychology. His reflections are a reminder that while the specifics of history change, human behavior remains remarkably predictable.
As he quoted Mark Twain, “Well, of course, today isn’t history yet, and when today becomes history several years from now, we’ll learn its lessons.”
That quote alone encapsulates the essence of investing: we are constantly in the process of living through history that will only make complete sense in retrospect. But as Marks points out, the patterns are already clear.
“The details of history change. The events change, the reasons for them change, the results of them change, but certain things do persist and rhyme, if you will, from year to year and generation to generation.”
The cycles of greed and fear, boom and bust, optimism and panic have remained unchanged through decades. Marks argues that investors have an innate tendency to overreact.
“People will always get overexcited when things go well and take asset prices too high, and then when things come off, they’ll get too depressed and take prices too low.”
These emotional extremes fuel the cycles that dominate markets. Investors chase performance during bull markets, pushing valuations to unsustainable levels.
And then, when the downturn comes, fear takes over, creating undervaluation. This perpetual swing, from excessive optimism to undue pessimism, is a fundamental truth of investing.
One of the most critical lessons from Marks is the role of leverage. “When things are going well, people will lever up their enterprises to magnify the gains, and they’ll do that because they underrate the probability of losses.”
Leverage, in good times, amplifies profits, but in downturns, it can be catastrophic. Investors often forget that leverage works both ways—magnifying losses as effectively as it magnifies gains. This is a lesson that has been repeatedly forgotten and relearned throughout financial history.
Discussing today’s market, Marks provides a balanced view.
“The economy is performing well. The prices are generous, let’s say high. In my memo of two months ago on bubble watch, I said ‘lofty but not nutty,’ and I stick with that.”
Unlike past speculative manias, he doesn’t see the kind of euphoric excess that signals a massive bubble. However, he cautions that today’s valuations, particularly in the S&P 500, are undeniably elevated.
“We know that the PE ratio on the S&P 500 is at an above-average level, maybe warranted based on the excellence of the companies in it, or maybe not, but certainly not underpriced.”
For investors, the takeaway is clear: cycles are inevitable. As Marks warns, “Bad deals will be done when spirits are too positive, and those will be exposed in slower times through losses.”
Investing successfully requires an awareness of these cycles, a refusal to get caught up in euphoria, and the discipline to resist excessive risk-taking in good times. History may not repeat exactly, but it certainly rhymes. And those who listen to history’s verses, as Marks does, are far better prepared for what comes next.
You can watch the entire interview here:
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