Billionaire investor Howard Marks is warning that the easy times in the stock market are likely over. In a recent interview, Marks talked about a quote “sea change” that is taking place as we speak that will fundamentally change the economy and the way people invest. Make sure to stick around to the end of the video because Marks provide details on how he recommends people invest to take advantage of a once in 40 year opportunity.
The US stock market has been on an amazing run for the better part of the last 4 decades. As we can see in this chart here, the S&P 500 has risen from roughly 100 at the start of 1980, all the way to a high of nearly 4,800 at the start of 2022. This means that $1,000 invested in the stock market in 1980, would have turned into a whopping $48,000 by the start of 2022, not even including dividends. If you include reinvested dividends, that $1,000 would have turned into a staggering $122,000. With these types of impressive returns, the last 40 years was arguably the golden era of the stock market.
During this time period, amazing companies were founded. The average publicly traded company became more profitable. American corporations grew as international markets opened and business became a global affair. All of these factors helped contribute to the extremely impressive returns the stock market generated. However, according to Howard Marks, all of those factors paled in comparison to what he considered the dominant driver of stock returns over the last 4 decades…. Declining interest rates.
Take a look at this chart here of the Federal Funds Effective Rate, a proxy for interest rates in the US economy. As we can see, interest rates peaked in the early 80’s with the fed funds rate hitting nearly 20%. From 1980 to 2010, interest rates continued to fall with each passing decade. That was until rates simply couldn’t go down any further. The fed funds rate was lowered to 0% in response to the great financial crisis and spent much of the following decade at that level. 40 years of constantly declining interest rates created a massive tailwind for the stock market. Let me explain. The value of any type of asset, whether it’s a stock, bond, or piece of real estate, is based on the cash it will generate for you as the owner, discounted back to the present day using an appropriate interest rate. I know that definition may sound complex but it’s actually incredibly simple.
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34 Comments
Very well explained!
is it AI voice or real?
Is this a good time to buy stocks? I know everyone is saying stocks are at a discount and all, but just how long will It take for us to recover, obviously there are strategies to maneuver in this present market but these strategies don't come common to the average folk, or am I better off putting my money elsewhere?
At some point a bull market ends for a bear to begin, it goes on and on… I intend spreading 50k – 150k across plummeting stocks to fuel my millionaire goal, but my concern is knowing when a market bottom has been reached. I'd appreciate valid tips please
The easy times have been over since three years, wake up people !
I shifted my institutionally restricted 401A retirement investments to a treasury based vanguard money market in February.
I thought that sell-off would be the big one.
I'm still up 10% for the year vs my other options are up 5% and dropping with the Market sell-off.
Depending on what the Market does I'll either invest in stocks, money Market accounts, or real estate. If the real-estate market crashes I'll start paying cash for foreclosures, and rent them out.
I still think a split of SCHD + QQQ is the way to go. 100 stocks in each ETF gives you 200 companies. also no overlap with these 2 funds. 85/15 or 80/20. Personally I put down 1.3m$ on few ETFs, still diversifying. This is Q4 definitely earning season, it was this time last year I made my first million with a liquid 200k. Invested it in a trader here in CA, I get weekly pay out which I invest back on long term ETF's. Google will be a huge buy for me when the market bottoms.
I would love to be able to listen to these entire videos, but I can't stand this woman's voice and inflections.
From your videos, as far as I understand, basically in a high/ "normal" interest rate, you better buy bonds or assets-light companies.
Thank you for the video, I found out that investing is not for everybody, you just need a strong stomach too see your portfolio go down. It might be wiser for a novice to start with copy trading investing, but it is not easy. To invest in growth stocks it is another level, definitely you need to know what are you doing.
I wonder if people that experienced the 2008 crash had it easier because. my portfolio has lost over $27000 and I don't see my retirement turning out well when I can't even grow my stagnant reserve
My question has to do with the Tesla stock.
I’d like to know why if you know, does C! Wall Street people who rather I say those who know why did they evaluate that stock? Why isn’t that stock going up when Tesla is doing so well in their car, sales business and cyber truck, I know I’ve seen that in Europe, and also Americans Are starting to buy Teslas and have been 10:55 for quite some time, especially with the Robo taxi business. Can you find out or give information about any of the stock prices going up with Tesla?
You are forgetting during that 40 yrs government debt has gone from under 1 trillion dollars when Carter left office to today 34 trillion dollars . There's your economy growth. All based on debt .Debt makes things look good for 40 yrs. In 2000 there was 4 trillion dollars in the M2 money supply . Today 21 trillion dollars in the money m2 money supply.
Love this advice. Scary times right now for investing. Might just focus on my multifamily portfolio
I love my life. Every time I start something somebody say the easy time is over.
I think that is my destiny.
Soo great to meet with you l want support comes for you
Respectfully Dude you have no vision poor baby.
Present 😊
It seems like we've gone back to the days of investing like Benjamin Graham. I've already started buying my first T-Bills and Corporate bonds.
Generally I like what he has to say but with this you don't think he's saying fixed income as that's the area he's in?
Im going to continue to invest in my Warren Buffett style 90/10 portfolio and as long as interest rates stay high, T bills/cash. Once interest rates decrease, it will be time to buy real estate.
The Risk / Return chart is based on the academic definition of risk (i.e. price volatility). Risk should be based on earnings volatility not price. Equity is still worth more in the long-term AND less risky if you buy said equity below intrinsic value.
Can you please show the formula that calculate the present value? Thank you.
In the long term the market on average has returned 7 to 10 percent above inflation and companies just have to adjust their profit margin because of inflation also, trust the market !
12:18 "No sane investor would lend money if their return in factoring inflation is negative". Yet, this is exactly what happened to bond investors in Weimar Germany post WWI. Investors bought bonds in fiat Deutsche Marks and the purchasing value of these Marks plummeted. When it became worthless, Germany introduced a new kind of Deutsche Mark which was backed by German land. There was a rush to get the new marks and the Bonds of German debt in the fiat Marks were bought back at a huge discounts. People with a savings account and government workers making a fixed salary lost their purchasing power, those who owned businesses and real assets did better. It's not so much that the people were insane, they may not have been financially literate and the government may not have been incentivized to correct that situation.
The easy times are over for the stock market, as investors brace for higher interest rates and a potential recession.
The graph you illustrated at the end. Could you add an interest rate axis to show how much it effects the graph?
How many "contracts A" can I sign right now? I wanna sign a million of them. 😜😉
where are the interest rates going from here? are they going to keep rising or taper off
The problem is the government cannot afford to pay back its debt at a higher rate.
Yeah sure the World has ended…Markets are bad and Fishing is better. blah blah blah…. Every years and every other month we DOOOOMED !!!! 🤣🤣 Have process and stick to it, that all I'm saying. too much drama on the markets. Oops I got a bite…yup the crash the end of the World doesn't matter. At least I got fish for supper.
Interesting insights, fixed income will find its ways to the average portfolio.
The chart should be corrected for log-scale 3:35 Because even if the change was big, it wasn't as extreme, as it could look from the linear chart.
He said times are different and that he cannot predict the future