The US stock market has rebound strongly in recent months, but Howard Marks continues to lure investors to a tough slogan in the economy, and this is also the case when congress is set to fix the coronovirus-ridden business environment A fresh fiscal stimulus package may be passed.
“Thus, this down-cycle cannot be fully cured only through the application of economic stimulus,” the co-founder and co-chairman of Oaktree Capital Management, the largest investor in distressed securities worldwide. Wrote in a long cloak, reflecting on the current state of the economy and market, published on Tuesday.
“Rather, the root cause has to be repaired, and this means that the disease has to be brought under control,” he wrote.
Marx says that with the disease infecting more than 37 million people globally, the economic stimulus is unlikely to reverse the damage done to economies in the US and around the world.
“The trauma has deepened, and the impact cannot be easily overcome,” writes the billionaire investor and co-chairman of Oaktree Capital Management.
Major commentary from investors is that the stock has a fresh wall of concern in most US presidential elections and fears of rising coronovirus cases with the Dow Jones industrial average comp.
On February 12, the record height is less than 3%, while the Nasdaq Composite Index comp,
And the S&P 500 SPX,
Both stand at less than 2% of their all-time elevation.
Marx explains not only the problems with the lack of stimulus, but also the losses from the months-long viral outbreak, including the huge revenue of state and municipal revenues that would weigh on economies of scale and scale. As cities struggle to fund. Pay schools, and firefighting and police.
“Police, firefighting and EMT are no less necessary, and the need for health care and family services has only increased,” Marx writes.
To be sure, he notes that more government spending is needed in at least 100 years for individuals, businesses and cities to emerge from the biggest epidemic, but managing the spread of the disease means that the economic Injecting new money to help with malaise. No immediate panacea.
“Economic reform is not an independent phenomenon, everyone is unaffected by the events. Instead, it is highly dependent on progress against the disease, as described above, but also on the continuation of fiscal expenditure in the interim, ”he says.
Marks attributes the Federal Reserve’s decision to cut its benchmark interest rate to the range of 0% to 0.25% and to indicate its intention to keep uber-low levels for the future to provide the most significant stimulus in financial markets . Epidemic era.
He said that the expectations of investment return, she insists, would also harm the current economy and long-term economic policy.
Marx explains the investment return outlook like this:
So the lower the rate of low-fed funds, the lower the bond yields will be, which means that the outstanding bonds with higher interest rates will appreciate. And lower yields on bonds mean that they give less competition to stocks, so stocks don’t have to be cheaper to buy. They will also appreciate. And if high-quality assets become high-value and thus provide low future returns, low-quality asset purchases – impacting rising prices and falling potential returns – will fall because they are high-quality. Appear to be cheaper relative to property.