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Howard Marks: Investors Must Take Fewer Risks in Pricey Market


By    |   Wednesday, 11 December 2019 11:49 AM

Investment guru Howard Marks says we’re not in a bubble, but he cautioned savvy investors that there are reasons to take less risk.

“The economic expansion and the bull market are old,” the Oaktree Capital Group LLC co-founder told CNBC’s Wilfred Frost.

“Valuations are above average. There’s a lot of uncertainty in the world and it strikes me that one should not have as much risk as one did three years ago or six years ago,” he says.

However, Marks thinks the current bull market can rise further as the U.S. economy is, to some extent, “the envy of the world.”

Marks — who co-founded Oaktree Capital Management in 1995 — told CNBC that he thinks the current bull market can rise further. The uncertainties are “not to say I think it’s going down … but I think there are reasons to have less risk going forward than you have had in recent years.”

Marks also made headlines recently when he said his firm has been putting more emphasis on safety in credit over time as Oaktree expects that the Federal Reserve won’t be able to hold off an eventual recession.

The Los Angeles-based investment giant focuses on analysis as opposed to ratings when selecting credit investments because “ratings don’t tell you whether something is safe or not,” Marks said during a Bloomberg TV interview. 

Meanwhile, investors apparently are sensing trouble in the wind.

Individual investors reportedly are fleeing stock funds at the fastest pace in decades despite what may be the best year for stocks since 2013.

Investors have pulled $135.5 billion from U.S. stock-focused mutual funds and exchange-traded funds so far this year, the biggest withdrawals on record, according to data provider Refinitiv Lipper, which tracked the data going back to 1992.

Investors have shifted hundreds of billions of dollars into bonds and money-market funds all year long as recession fears rang and tariff wars lashed markets, analysts told the Wall Street Journal

The exodus to traditional safe harbors of investing is also a sign that investors aren’t chasing the stock market’s strong performance, seemingly setting record highs on a daily basis. This suggests major indexes like the S&P 500 still have plenty of room to run after a decade-long rally, WSJ.com reported.

“There’s not a lot of faith in this market,” Scott Wren, a senior global equity strategist at Wells Fargo Investment Institute, told the Journal. “There’s no chasing going on. Usually before you hit the top in a cycle, there’s a lot of chasing and fund flows are higher.”

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Oaktree Capital Group LLC Co-Founder Howard Marks says we’re not in a bubble, but he cautioned savvy investors that there are reasons to take less risk.
howard marks, bubble, risk, investors
Wednesday, 11 December 2019 11:49 AM
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