Howard Marks has navigated market cycles for decades, but his recent Bloomberg interview revealed even he finds today’s environment extraordinary. “This is the biggest change in the environment that I’ve seen probably in my career,” he says. The rapid shift from globalization to trade wars and tariffs has created unprecedented turbulence – the kind that makes veteran investors pause.
Marks doesn’t mince words about what’s at stake: “I believe that the last 80 years since World War Two have been the best economic period in the history of mankind. And one of the major reasons was the growth of trade.”
Now that foundation is cracking, and nobody’s quite sure what comes next.
When it comes to investing, Marks makes a clear case for credit over stocks right now. “The yields on credit are still very healthy,” he notes, pointing out that high-yield bonds have jumped from 7.2% to nearly 8% yields in just weeks.
His take on stocks is more cautious: “Stocks have delivered an average of 10% a year for the last hundred years, but not when the P/E ratio was 19.” With valuations where they are today, he thinks expecting historical returns would be a mistake.
The market’s recent drop has Marks thinking like a shopper at a sale. “Bloomingdale’s just put everything on sale,” he quips. “Prices have come down…It’s on sale. That should encourage people to think about buying.”
But he’s quick to add the big caveat: “Will they go down further? Nobody knows.” That uncertainty is what makes this moment so tricky. “The world order… has been shook up like a snow globe by the events of the last days. And nobody knows what it’s going to look like,” Marks observes.
He saves his sharpest warning for the U.S. fiscal situation, which he describes with a memorable analogy: “The U.S. has behaved like somebody who has a golden credit card where there’s no credit limit and the bill never comes.”
The danger, as Marks sees it, is that “if people don’t like the dollar, don’t like investing in the United States, don’t want to hold an unlimited number of treasuries…the fiscal situation will be very complicated.”
Through it all, Marks keeps coming back to one fundamental truth: “There’s no analysis you can do to determine whether today’s asset prices are right for the environment ahead.”
In his view, “the probability that we know what the future is going to look like is lower than ever.” That doesn’t mean investors should sit on the sidelines – just that they need to be more careful than ever. As Marks puts it, “It doesn’t make any sense to say just a minute, I did X, Y, Z when the price was 100. Today the price is 90, so I’m going to boycott it.” The game hasn’t changed, but the rules sure have.
You can watch the entire interview here:
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