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Sept. 20, 2019, 10:02 a.m. EDT

Fed rates cuts are a mistake, says Oaktree’s billionaire co-chairman

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By Barbara Kollmeyer, MarketWatch


Bloomberg News/Landov
Oaktree chairman Howard Marks weighing in...

We’re going to hear from a busy lineup of Federal Reserve officials on Friday, and they may shed more light on why the bank was so divided on this week’s interest rate cut.

Our call of the day , from Oaktree Capital’s billionaire co-chairman Howard Marks, also weighs in on the Fed as he says the economy doesn’t really need the rate cuts it’s been doling out.

“Our economy is the best performing in the world of major economies. So I’m happy with it and I don’t think I’d be stimulating at this time,” Marks told CNBC in an interview. “Ten years later, do you want to cut rates to extend an economic expansion which is the longest in history? Some question, I question whether that’s a legitimate goal.”

The Fed should be controlling inflation and supporting growth to create jobs, but not stopping a recession, he said. Not that he’s worried too much about the latter, citing consumer strength, even as the manufacturing sector struggles with trade-war angst.

Opinion: Two-thirds of these corporate insiders see a U.S. recession by end 2020

It’s also not the Fed’s job to bail out an ailing stock market, says Marks.

“OK, so you want to create jobs, OK maybe you want to prevent recessions, which I don’t think you can do in perpetuity. But do you want to cut rates because the stock market is going down? I think that’s totally illegitimate,” says Marks.

Read: Billionaire investor says Elizabeth Warren as next U.S. president would be a disaster for markets

The market

The Dow /zigman2/quotes/210598065/realtime DJIA -0.95%  , S&P /zigman2/quotes/210599714/realtime SPX -0.39%    and Nasdaq /zigman2/quotes/210598365/realtime COMP -0.83%   are slightly up at the start. Gold /zigman2/quotes/210039486/delayed GCZ19 +0.04% is up, along with oil, and the dollar /zigman2/quotes/210598269/delayed DXY +0.05% .

Europe’s stocks /zigman2/quotes/210599654/delayed XX:SXXP -0.32% are grinding higher, and Asia /zigman2/quotes/211618636/realtime XX:ADOW +0.08% struggled too. In China, the People’s Bank of China followed this week’s Fed rate cut with a trim to its one-year loan prime rate, as expected.

Read: How to profit from the ‘best of both worlds’ in stock investing

The chart

Investors have been on the move lately — out of bonds and into stocks. Our chart of the day , from Bank of America Merrill Lynch makes that abundantly clear. In the past two weeks, $34 billion has flowed out of stocks, with $10 billion coming out of government bonds, the bank notes.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
26,770.20
-255.68 -0.95%
Volume: 293.61M
Oct. 18, 2019 5:08p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
2,986.20
-11.75 -0.39%
Volume: 1.99B
Oct. 18, 2019 5:08p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,089.54
-67.31 -0.83%
Volume: 1.82M
Oct. 18, 2019 5:16p
loading...
/zigman2/quotes/210039486/delayed
US : U.S.: Nymex
$ 1,494.70
+0.60 +0.04%
Volume: 5,145
Oct. 20, 2019 8:22p
loading...
/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
97.33
+0.05 +0.05%
Volume: 0.00
Oct. 20, 2019 8:22p
loading...
/zigman2/quotes/210599654/delayed
XX : STOXX
391.84
-1.24 -0.32%
Volume: 0.00
Oct. 18, 2019 5:50p
loading...
/zigman2/quotes/211618636/realtime
XX : Dow Jones Indices
3,240.31
+2.50 +0.08%
Volume: 0.00
Oct. 20, 2019 8:32p
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