Federal Reserve veteran Howard Marks believes that interest rates will not return to their post-financial crisis lows, a move he views positively. In an interview with CNBC, Marks explained that the U.S. economy is currently performing well and does not necessitate additional stimulus. The current federal funds target rate of 5.25% to 5.5% is seen as an emergency measure to combat inflation, and Marks anticipates that the Fed will eventually lower rates to a more sustainable level in the threes. However, Marks believes that rates will not fall back to zero or near-zero levels like they were between 2009 and 2021. He argues that such low rates have led to economic distortions and excessive risk-taking and that interest rates should primarily be determined by free market forces. Marks emphasizes the importance of allowing credit to play a significant role in investment portfolios, given the attractive interest rates currently available. He notes that his firm, Oaktree Capital Management, specializes in distressed securities and benefits from the higher interest rate environment. Marks believes that investors can achieve equity-like returns from investments with contractual returns approaching historic equity market averages.
Fed Won’t Return to Ultra-Low Rates, Says Howard Marks
