“Normally we think we know what’s gonna happen in the future. We normally assume the future will look mostly like the past…and usually it works because the world doesn’t change that much…the world has been shook up like a snowglobe by the events of the past few days…this is in flux…even if you know what our country is gonna do… we don’t know what other countries are gonna do.”
Howard Marks examines the consequences of market shifts and tariff implementation on credit and equity yields, asserting that credit remains a more favorable investment, with high-yield bond yields rising from 7.2% to around 8%. He critiques the transition from a globalized trade system to one with increased restrictions, warning that this regression could harm economic welfare and contribute to persistent inflation, reversing the benefits of globalization. Marks highlights the consumer burden from tariff-induced costs and the challenges in evaluating risk across asset classes, especially given the elevated price-to-earnings (P/E) ratios in equity markets. He notes the unpredictability of the current economic environment and the difficulties in macro forecasting, cautioning investors against making decisions based on uncertain geopolitical factors. Moreover, Marks voices concerns about decreasing investor confidence in the U.S. as an investment hub due to unfavorable changes in fiscal responsibility and the rule of law, while concluding his segment with appreciation for the collaborative discussion.
“There’s no analysis you can do to determine whether today’s asset prices are right for the environment ahead…there never is. It’s always conjecture…that’s in theory why the greatest investors are great. Because they make those judgments better than most people.”- Howard Marks
