Investors should consider taking a more cautious approach in today’s market.
This was the advice from Howard Marks, co-chairman of Oaktree Capital, during an interview with CNNMoney’s editor-at-large Richard Quest on “Markets Now” on Wednesday.
Marks emphasized that “defense is more critical than offense” in the current environment, highlighting insights from his book, “Mastering the Market Cycle: Getting the Odds on Your Side.”
He recommended that investors look into utilities while reducing their exposure to the increasingly volatile technology sector.
The focus on defense is warranted for a number of reasons.
Despite recent stock market gains, Marks cautioned that we might be approaching the conclusion of the current bull market.
“I’m not suggesting you exit the market,” he clarified. “Being out could pose significant risks today, and increasing cash reserves would be inadvisable.” However, opting for more stable stocks could provide a buffer against substantial losses should market conditions shift.
Marks also highlighted the ongoing trade conflict with China as another factor that should encourage cautious investing.
“While we are engaged in a trade dispute with China and resolution is likely, there exists a potential for things to go sideways,” he warned. “If that happens, the global economy could face serious repercussions.”
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In a recent interview with CNNMoney’s Richard Quest, Howard Marks, co-chairman of Oaktree Capital, urged investors to adopt a more defensive approach in their investment strategies. Marks emphasized the importance of prioritizing safer investments during uncertain economic conditions, declaring, “Defense is more important than offense.” This shift towards a defensive stance is particularly pertinent given the current stock market environment, which, while buoyant, may be nearing the end of its bull cycle.
Marks, who authored the book “Mastering the Market Cycle: Getting the Odds on Your Side,” recommended that investors consider increasing their allocations to utilities and reducing their holdings in more volatile sectors, particularly technology stocks. His advice reflects a broader strategy to shield investments from potential downturns that could arise as the market conditions shift.
While Marks did not advocate for completely exiting the market—cautioning that doing so could be precarious—he highlighted the value of more stable stocks during turbulent times. He expressed concern that the current bull market may be reaching its peak, which could lead to heightened volatility in the near future. According to Marks, a careful approach in stock selection could mitigate risks and protect against substantial losses, should the market take a downturn.
In addition to general market considerations, Marks pointed to the ongoing trade tensions between the United States and China as a factor contributing to market uncertainty. While he asserted that a resolution to the trade battle is likely, he also acknowledged the potential for escalation and the significant consequences it could have on the global economy. The unpredictability of international trade relations adds another layer of risk for investors, making a defensive investment strategy even more crucial.
Overall, Marks’ insights recommend a measured approach moving forward. Investors are encouraged to balance their portfolios with more defensive assets while being mindful of the intricate dynamics of the current economic landscape, including factors such as geopolitical tensions and market cycles. By doing so, they can position themselves to weather potential storms in the evolving markets.
Marks’ recommendations and market analysis were shared during the “Markets Now” segment, which airs live from the New York Stock Exchange every Wednesday at 12:45 p.m. ET. The program, hosted by CNNMoney’s business correspondents, offers valuable insights into market trends and expert commentary, and highlights are accessible online and through the Markets Now newsletter.
In conclusion, as uncertainty looms over the market, Marks’ focus on defensive investing serves as a timely reminder for investors to reassess their portfolios, favoring stability and reliability in the face of potential volatility and external economic pressures.
