Howard Marks says the market is ‘pricing in a bad scenario’ and there is value for investors

Investing

Oaktree Capital co-chairman Howard Marks said Monday that the stock market is “pricing in a bad scenario” after its rapid sell-off and that it makes sense for some investors to buy into the market. 

“I do think that here we are down 30 [percent] from the high — and the high in my opinion was not a crazy high — I think we have value here. And I’ve expressed the view that spending some money is not irrational here,” Marks said on CNBC’s “Closing Bell.”

The major U.S. indexes suffered one of their worst days ever on Monday, with the Dow Jones Industrial Average falling 12.9% and the S&P 500 sliding 12%. The day continued a volatile period for the indexes, which have been abruptly dragged from record into highs into a bear market as the coronavirus pandemic disrupts economies around the world.

The S&P 500 is now down more than 29% from its all-time intraday high on Feb. 19, while the Dow is more than 31% its intraday record from Feb. 12.

“You might use the word ‘panic,’ but I think panic suggests irrationality and I don’t think the concerns people have expressed are necessarily irrational,” Marks said of the market decline. “It’s an extreme reaction to an extreme event compressed into a short period of time.”

Despite seeing value in the market, Marks said that he “did not think there’s an argument to be made for spending all your money” and that the sell-off could be only 60% over, based on some of the worst periods for stocks in history.

He declined to say which industries he thought were attractive, but said investors should decide whether they want to buy attractive stocks now or wait to see if they go lower. 

“Which is more important to you? To get some of the values that exist today, or to have more dry powder ready to go in if it goes lower? And you can’t accomplish both goals simultaneously,” Marks said. 

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