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Legendary investor Howard Marks says it doesn't matter when the Fed starts raising interest rates — the key thing is that it's hiking

Jan 27, 2022, 19:34 IST
Business Insider
Howard Marks, co-founder of Oaktree Capital Management.Bloomberg TV
  • The Federal's Reserve timing of interest rate rises doesn't matter, Howard Marks told CNBC Wednesday.
  • "The only thing that matters is the general direction and the themes, in my opinion," the legendary investor said.
  • The Fed has paved the way for at least four rate hikes this year, with the first set for March.
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Investors trying to work out exactly when the Federal Reserve will kick off making interest-rate hikes aren't focusing on what's important, according to billionaire Howard Marks.

"I think the only thing that matters is the general direction," the cofounder and co-chairman of Oaktree Capital Management said on CNBC's "Street Signs Asia" Wednesday.

"If they're gonna raise rates — that's all that matters," he added. "In the month that they're going to start? It doesn't matter."

"I'm not a trader. I'm not a day-to-day investor. I'm a long-term investor. And the only thing that matters is the general direction and the themes, in my opinion."

In its long-awaited policy update Wednesday, the Fed paved the way for a bare minimum of four interest rate hikes this year. Analysts said chairman Jerome Powell's conference, on the whole, was a "very hawkish" one.

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Powell noted the Fed expects it will be appropriate to raise interest rates soon, because the economy no longer requires high levels of monetary policy support.

Stocks turned negative after Powell's press statement, but were recovering some losses early Thursday. Higher interest rates make companies' future profits look less attractive, which weighs on equity prices.

The Fed signaled that a reduction in its balance sheet, known as quantitative tightening, will come after the first rate hike, but gave no specific timing.

Marks suggested that this was done on purpose, to give the Fed room to be flexible.

"I think they don't want to be confined to a box," he said. "If they say something specific about the rate of change, or the timing of the change, or the amount of change, then if they don't do it, then people will say 'you've misled us.'"

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"I think there has to be some vagueness so that they can have freedom of operation," he added.

The US central bank sees hot-running inflation — which stands well over the Fed's goal of 2% and at its highest level in almost four decades — as the main risk to the US economic outlook.

One surprisingly hawkish signal from the Fed came when Powell failed to rule out raising interest rates at every meeting of policymakers for the rest of 2022 — a total of seven hikes.

Markets are now anticipating the first rate increase in the pandemic era will be in March, and likely to be by 25 basis points.

Read More: Bank of America: Buy the dip on these 15 stocks that are well-positioned to bounce back and beat the S&P 500 when the Fed pushes up interest rates

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