Legendary investor Max believes that a "sea change" is about to take place in the US financial market.
Legendary investor Howard Marks warned in his latest memo on TuesdayInvestors' "Goldilocks mentality" about the economy can disappoint and incur losses on their own.
Billionaire Marks, co-founder of Oaktree Capital Management, the world's largest non-performing giant, boils down his assessment of the current market consensus to five main points:
1. Inflation is moving in the right direction and will soon reach the Fed's target of about 2%;"Before I go any further, I want to point out that for me, these five points are kind of like the 'Goldilocks mentality,' which is that the economy isn't overheated enough to cause inflation and it's not overheated enough to cause a slowdown," Marks noted. ”2. Therefore, there is no need for further interest rate hikes;
3. A further result is that there will be a soft landing in the United States, marked by a mild recession, or no recession at all;
4. As a result, the Fed will be able to bring interest rates down;
5. Ultimately, it will benefit the economy and the economy.
The 77-year-old says that in his career, such "fairy tales" have played out several times, but rarely for long. Some things usually don't work the way one would like them to, he writes, and the economy can drift off perfect. “An important effect of Goldilocks thinking is that it creates high expectations among investors, which creates room for potential disappointment and loss
U.S. equities ended last year strongly**, with the Dow Jones Industrial Average (DJIA) setting multiple records, and the S&P 500 (SPX) returning more than 26%, just 0.0. short of the record-setting level on January 3, 20225%。At the beginning of the new year, ** fell slightly.
Although interest rate traders have lowered their expectations for the Fed to cut interest rates this year, according to CME Group's Fed Watch toolFederal*** still reflects market bets on a 53 chance that Federal** rates will be cut by 150 basis points or more by December8%。
Max has previously described a generational "sea shift" in financial markets, where interest rates have risen from near zero and investors are no longer reliant on ** and riskier investments to achieve their overall return targets.
Marks said in a memo on Tuesday,He had no problem with the correctness of what he described as the "Goldilocks Consensus". But even so, he stuck to his expectation that the federal interest rate would remain in the range of 2% to 4% over the next few years, rather than 0% to 2%. He said:
"My guess is that over the next 5 to 10 years, federal** interest rates will average 3% to 35%. If you think I'm wrong, ask yourself if you're betting your money on a different interest rate range. ”