Oaktree Capital’s Howard Marks: The era of low rates not returning any time soon
Jan. 28, 2025 3:11 PM ET
By: Monica L. Correa, SA News Editor
 Dilok Klaisataporn
Investors who profited greatly during the era of “easy money” should not expect the same strategies to deliver such exceptional returns moving forward, said Howard Marks, co-founder of Oaktree Capital Group.
“I don’t believe that the next 10 years will be characterized by declining interest rates or ultra-low interest rates,” he said, during the Miami Hedge Fund Week at the Global Alts conference.
He said that overestimating the fundamentals of large-cap companies is dangerous and weighted on the “irrationality of the markets” while the Federal Reserve is shifting away from ultra-low interest rates.
Speaking about the frenzy seen on Monday over Chinese AI start-up DeepSeek causing a big Nvidia (NASDAQ: NVDA) selloff, he said that “if it were just objective, clinical, unemotional investors looking at Nvidia (NASDAQ: NVDA), there would be no reason why yesterday’s news should knock all these other things down.”
“It just shows you the pervasiveness of psychology and the irrationality of the markets in the short run,” he said.
Also, in a recent note to clients, Marks he cautioned about above-average stock valuations, including the Magnificent Seven stocks – Nvidia ( NVDA), Apple ( AAPL), Meta ( META), Tesla ( TSLA), Microsoft ( MSFT), Amazon ( AMZN), and Alphabet ( GOOGL) – as well the fact that large-cap stocks have seen “automated buying…without regard for their intrinsic value.”
“Everybody should look at their holdings and try to make sure that the things they own, they own based on strong and improving fundamentals,” he said. “If you can get low single-digit returns from the S&P 500 with great uncertainty and 7.3% from high-yield bonds contractually, isn’t it better?” |
