“Interest rates will not return to ultra-low levels, nor will they continue to decline. The era of easy money is over,” said Howard Marks, chairman of Oaktree Capital, in a press briefing with Korean reporters in New York on Jan. 24. Marks, a legendary Wall Street investor, explained that investments relying on leverage, which performed well during the periods of falling interest rates since 1980, are unlikely to achieve the same success in the future. He also warned that “sustaining continuous economic stimulus through monetary policy carries risks.”
Just five days later, on Jan. 29, the U.S. Federal Reserve decided to leave interest rates unchanged, keeping the benchmark rate at 4.25-4.5%, citing rising inflation and uncertain economic outlooks.
Founded by Marks in 1995, Oaktree Capital is a major asset management firm overseeing approximately $200 billion. Marks, who graduated from the University of Pennsylvania and earned an MBA from the University of Chicago, has a personal fortune estimated at around 3 trillion won. His investment philosophy, published in his widely read memos (reports), is so influential that even renowned investor Warren Buffett has said, “When I see them in my mailbox, they’re the first thing I open and read.”
Has the Fed’s rate-cutting cycle ended?
“While the Fed could still raise rates, a cut is more likely. However, I don’t think the U.S. benchmark rate will fall to 3–3.5% this year.”
Isn’t the current interest rate relatively high?
“Over the past 70 years, the Fed’s average interest rate has been just below 5%, similar to current levels. Historically, this level is quite normal. The ultra-low interest rates from 2009 to 2021, following the Fed’s response to the global financial crisis, were unusual.”
Marks described the current situation as a “sea change,” emphasizing that investors need a different strategy from the past era of continuous rate cuts.
Is the traditional 60/40 portfolio still effective?
“Nobody strictly follows the so-called ‘60/40′ stock-bond portfolio anymore. Many investors are actively exploring alternative assets such as private equity. I believe credit investments and fixed-income instruments now offer returns that rival equities and even exceed the expectations of most investors. For instance, while the S&P 500′s annual return may be just 3-4%, or even 2%, the average yield on high-yield bonds stood at 7.2% this morning. There is a long-held belief that stocks always outperform bonds, but for those seeking to mitigate risk while maintaining returns, reallocating from the S&P 500 to bonds is hardly an irrational choice.”
Marks rose to prominence after correctly predicting the dot-com bubble’s collapse in 2000. Earlier this month, he cautioned investors against excessive optimism about the U.S. stock market.
Do you believe the stock market is in a bubble?
“A bubble isn’t defined solely by high prices—it occurs when investors abandon sound valuation principles out of fear of missing out. That’s not what we’re seeing today. If you’re nearing retirement and need to preserve capital, reducing risk exposure is a prudent decision. But that’s different from issuing a warning to exit the market entirely.”
Have stock prices increased?
“They are somewhat expensive—particularly the ‘Magnificent 7′ (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla). According to JPMorgan, there have only been four instances in history when the S&P 500 gained more than 20% for two consecutive years. This marks the fifth. Historically, declines tend to follow within two years. The S&P 500′s price-to-earnings ratio currently stands at 22. Based on historical trends, buying at this level suggests that over the next decade, the index’s average annual return will likely range between -2% and 2%.”
◇ South Korea faces uncertainty, but conditions expected to improve by May
Concerns over rising political uncertainty in the U.S. have intensified following Donald Trump’s election.
“Trump does not follow conventional thinking. He takes actions others would not typically consider. It’s often unclear whether he intends to follow through when he makes statements, but his strategy frequently involves making bold threats, securing concessions, and then declaring victory.”
Will China remain an attractive investment destination under Trump?
“Trump is less predictable than Biden, making him a greater risk for China. However, I expect his provocations will ultimately push China to the negotiating table. Within six months, we are likely to see progress in U.S.-China relations, with Trump claiming victory and tensions easing.”
How do you assess South Korea’s political climate from an investor’s perspective?
“South Korea is experiencing a period of uncertainty, but I expect conditions to improve by May. I have no reservations about investing there and am actively seeking opportunities.”
