'What happens if they stop?': Billionaire Howard Marks fears for stocks if the Fed ends its program to 'levitate' markets

• In a CNBC interview this week, the billionaire investor Howard Marks questioned whether the stock market's recent rally could continue once the Federal Reserve stops levitating the markets.
• "What happens if they stop, and will they ever stop, and can they keep doing it forever?" he said.
• The Fed has issued $2.3 trillion in loans and bought individual corporate bonds as part of its efforts to keep the economy afloat.
• Marks also said in the interview that reckless day trading could lead to a disaster for markets.

In a CNBC interview this week, the billionaire Howard Marks questioned whether a market rally in which stocks have jumped from early pandemic lows in recent weeks is sustainable once the Federal Reserve stops levitating the markets.

"It looks to me and many other people that the markets are somewhat ahead of themselves," the famed investor and Oaktree Capital Management cofounder and chairman told CNBC.

In recent months, the Fed has attempted to prevent the US economy from collapsing and reinvigorate investors' faith in markets.

Marks said the Fed had "done a lot of good things to the economy," including pumping large amounts of liquidity into the system and indicating that it intends to keep lifting markets.

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Some of the Fed's measures include reducing interest rates to almost zero and providing $2.3 trillion in lending to support households, employers, financial markets, and state and local governments.

The Fed announced earlier this month that it would begin buying individual corporate bonds through a program known as the Secondary Market Corporate Credit Facility that would take in up to $250 billion in corporate bonds from eligible issuers.

"The question is if they levitate the markets, can they keep doing it forever? If they get the market to a level where it wouldn't be but for their buying, then does that mean that the markets are dependent on Fed buying forever?" Marks said. "And what happens if they stop, and will they ever stop, and can they keep doing it forever?"

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Markets have rallied in the past few weeks despite coronavirus cases increasing in parts of the US.

Some have attributed the rise in markets to the stimulus measures enacted by the Fed and optimism that the economy will recover as more and more businesses reopen.

The S&P 500 has risen more than 35% since touching lows on March 23.

In the interview, Marks also expressed concerns that reckless day trading could cause a market plunge, saying it's "not healthy to have people who are buying stocks for fun."

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