Sea Change
Howard Marks · 2022
"A generational shift from falling to elevated rates ends the 40-year tailwind; credit and value are the new winners."
In 2022, Howard Marks declared a fundamental 'Sea Change' in global finance. He argued that the 40-year era of declining interest rates (1980-2020) was over, and the new era of higher rates would require entirely different investment strategies.
For four decades, steadily declining interest rates acted as a massive tailwind, artificially boosting asset prices and making debt incredibly cheap. This penalized savers and rewarded leveraged risk-takers. Marks argued that inflation and structural economic shifts mean interest rates will remain structurally higher. In this new regime, 'financial engineering' and relying on multiple expansion will fail; investors will actually have to generate cash flow to survive.
What was the primary driver of the 'Sea Change' Howard Marks identified in 2022?
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