Stocktake: Which way now for stocks?

Investors should not be surprised by another bout of market bloodshed

Optimists hope that the financial impact is sharp but brief as policymakers throw the kitchen sink at the economy. Photograph:  Kazuhiro Nogi/AFP via Getty Images)

Optimists hope that the financial impact is sharp but brief as policymakers throw the kitchen sink at the economy. Photograph: Kazuhiro Nogi/AFP via Getty Images)

 

Stocks soared higher in the last week of March but investors should not be surprised by another bout of market bloodshed, says Howard Marks. The Oaktree Capital founder’s memos are always worth reading – “the first thing I open and read”, Warren Buffett once said – and his latest, Which Way Now?, is characteristically nuanced, exploring multiple arguments advanced both by bulls and bears.

Optimists hope for the “early cessation of bad news and the arrival of better news in the not-too-distant future”; the virus gets brought under control within months, that the financial impact is sharp but brief as policymakers throw the kitchen sink at the economy. In the bear case, everything doesn’t go back to normal for at least a year or two, and the effects of the lockdown on businesses end up creating depression-like conditions.

While Marks was cautious during the global financial crisis, he notes everyday life was not nearly as impacted as now. There was “no obvious threat to life or limb” and the range of negative outcomes today – social isolation, disease and death, economic contraction, enormous reliance on government, uncertainty about the long-term effects – are particularly stark.

No one knows what will happen. Marks reckons risk assets at the peak of the recent rebound were fairly priced for the optimistic case but “didn’t give enough scope for the possibility of worsening news”. That means indices are vulnerable but for investors, “the most important thing is to be ready to respond to and take advantage of declines”.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.