Billionaire investor Howard Marks is warning about a once in a lifetime financial event that is occurring right now as we speak. This quote unquote “sea change” is decades in the making and will surely send shockwaves throughout every corner of the economy and stock market.
Make sure to stick around to the end of this article because we are going to cover what exactly Howard Marks is seeing, why this shift is occurring, and most importantly, what you must do to protect yourself from what’s to come.
Take a look at this chart here of the US Fed Funds rate dating back to 1954. The Fed Funds rate is a proxy for interest rates in the broader economy. As crazy as it sounds, this simple chart is one of the single most important things when it comes to understanding what has happened in the economy and stock market over the better part of the last 50 years. And, according to Howard Marks, will help determine what’s in store for the future. As we can see here, interest rates peaked at nearly 20% in the early 1980’s.
Over the next roughly 30 years, interest rates had their fair share of highs and lows. Interest rates fell and rose, but as you can see, each peak was lower than the previous one. This downward trend in interest rates continued for years, until rates could finally go no lower. 0% interest rates were hit in 2008 and remained there for the better part of the next 15 years.
It was nearly universally accepted that these incredibly low interest rates were going to become a permanent fixture in the economy moving forward. That was until one ugly, evil, terrible 9 letter word entered the picture… The villain in our story…Inflation.