Howard Marks is not as worried as other notable investors. Here's why

Published Wed, May 4 20229:21 AM EDT

Recession worries have grown prevalent on Wall Street as the Federal Reserve hikes rates aggressively to combat high inflation, but Oaktree Capital Management's Howard Marks isn't as pessimistic as other notable investors. "I don't think it's around the corner," Marks said on CNBC's "Closing Bell" Tuesday. "There are a lot of factors. Corporations are in good shape. Consumer's in good shape. The balances sheets are high. I don't think [recession is] in the short term." The central bank is slated to unleash aggressive action to battle the highest inflation in 40 years. The Federal Open Market Committee is expected to raise interest rates by a half point at the conclusion of its two-day policy meeting on Wednesday, the biggest hike in 22 years. The Fed is then set to lay out an aggressive tightening campaign where it also reduces the size of its securities holdings. The drastic tightening led many to believe that it will tip the economy, still recovering from the pandemic, into a recession. Goldman Sachs has called for a 35% chance of a recession in the U.S. over the next two years. Meanwhile, billionaire hedge fund manager Paul Tudor Jones said this week the environment for investors is worse than ever as the Fed is raising interest rates when financial conditions have already become increasingly tight. Still, Marks most of the damage could be done as the names that outperformed earlier in the cycle have experienced big declines. The S & P 500 lost 8.8% in April, its worst month since March 2020 at the onset of the Covid pandemic. But technology stocks were the epicenter of the April sell-off amid high interest rates and supply chain issues stemming from Covid-19. The Nasdaq Composite fell about 13.3% in April, its worst monthly performance since October 2008 in the throes of the financial crisis. The Nasdaq is currently in a bear market and many high flying names that led during the pandemic have been cut in half. "I do think the worst of the excesses have been corrected. The groups that did the best in '20 and '21, have been hit the hardest," Marks said. The investor added that he feels better about the value of bonds as yields rose from historic lows. Bond prices move inversely with bond yields. "The increase in interest rates have brought down.. credit and bonds, and they are now offering much more attractive yields than they did six months ago," Marks said.