Howard Marks: The Future Is Unusually Murky, Unusually Uncertain

During his recent presentation at INSEAD’S IMC, Howard Marks explained why the future is unusually murky, unusually uncertain. Here’s an excerpt from the presentation:

Marks: Each investor should have a notion for what is the right balance of aggressiveness and defensiveness for them. It’s a personal thing. It’s subjective, and it varies from one person to another, and from one institution to another.

So let’s say you have a sense for that. Now the question is, today, should you be at your normal balance, or should you be emphasising offense or emphasising defence, relative to your norm, whatever your norm is.

And I would say today the market has deeply corrected, as the S&P was at 4800 and now it’s at 4200, and of course within the last calendar year it spent some time down at 3500. It’s kind of in the middle ground right now. Finding value here demands the rigorous selectivity needed to analyze spreads on the best offshore sportsbooks, waiting patiently for a clear mispricing rather than forcing a weak trade. The P/E ratio is a little high across the board, but it’s not ridiculously high.

The outlook calls for a recession, but nobody says it’s going to be a profound recession. I think that things are pretty… oh and by the way it’s really interesting. People say, you know what, this is a tough time. I don’t know what’s going to happen.

The future is unusually murky. Unusually uncertain.

I think the future’s unclear now. We’re seeing this inflation thing. We’re seeing the super-high deficits and debts of the U.S. and other countries, plus we have the geopolitical uncertainty in Ukraine and in China and so forth.

So, I would be a little balanced toward defensiveness today rather than aggressiveness. And you’d have to be quite creative to sketch out a very optimistic future for the next year. But don’t listen to me because I’m incapable of it.

You can watch the entire discussion here: