Bloomberg TV
- The recent stock-market rally is “inappropriately positive,” Howard Marks told CNBC on Monday.
- “We’re only down 15% from the all-time high of February 19,” the billionaire investor said about the S&P 500 index.
- “It seems to me the world is more than 15% screwed up.”
- Marks highlighted the extraordinary conditions in a recent memo: The fiercest pandemic in a century, remarkable declines in growth and oil prices, and unprecedented action by governments and central banks.
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Howard Marks, the billionaire boss of Oaktree Capital Management, described the recent stock-market rally as “inappropriately positive” on CNBC’s “Halftime Report” Monday.
“We’re only down 15% from the all-time high of February 19,” the investor said, referring to the S&P 500. “It seems to me the world is more than 15% screwed up.”
The benchmark index closed about 17% below its February high on Monday after oil prices tanked. However, it has still rallied about 27% since approaching the 2,200 mark on March 23.
“It took seven years to get back to the 2000 highs in 2007,” Marks told CNBC. “It took five-and-a-half years to get back to the 2007 highs in late 2012.”
“Is it really appropriate that, given all the bad news in the world today, we should get back to the highs in only three months? That seems inappropriately positive,” he added.
The coronavirus pandemic has forced authorities to shut non-essential businesses and order their populations to stay at home to reduce transmission and avoid overwhelming hospitals. As a result, alarm bells for the US economy have been ringing in recent weeks, with a huge recession imminent.
More than 22 million Americans filed for unemployment benefits in a four-week span. Retail sales slumped by a record 8.7% in March. Moreover, industrial production and manufacturing suffered their biggest decline in at least 75 years, and housing starts plunged to their lowest in more than 30 years.
The upshot is that Morgan Stanley expects the US economy to shrink 30% in the current quarter.
Marks highlighted the extraordinary situation in a memo last week. He pointed out that the US faces potentially the worst pandemic in a century as well as its largest economic contraction since the Great Depression, the greatest oil-price decline in history, and the greatest intervention by central banks and governments of all time.
Marks has changed his tone significantly as markets have rebounded.
“I no longer feel defense should be favored,” he said in early April, highlighting buying opportunities. Oaktree is also raising $15 billion to launch the world’s biggest distressed debt fund, Bloomberg reported last week.
