Billionaire investor Howard Marks, co-founder of Oaktree Capital Management, is drawing on his legendary experience from the 2007-08 financial crisis to issue a new warning: today’s market is in the “early days of a bubble.” His cautionary stance is underscored by his history of making bold, profitable moves during periods of market distress.
Catching a Falling Knife
Recalling the lead-up to the 2008 crash on the ‘My First Million’ podcast, Marks explained his philosophy. “A lot of people say, you know, we’re not going to try and catch a falling knife,” he stated. “And I believe that you make the big money catching falling knives carefully.”
In 2005-06, he detected that the “world was behaving in a carefree manner.” Without knowing the specifics about subprime mortgages, he saw a general lack of prudence.
“If a deal like this can get done, the world is exercising inadequate prudence,” he recalled thinking. This conviction led him and his team to begin raising $3 billion on the very first day of 2007, anticipating a major opportunity as the pro-risk environment inevitably faltered.
Déjà Vu in Today’s Market
Now, Marks sees parallels. He has described the current environment as one where stocks are “expensive relative to fundamentals” because investors “like stocks too much.”
He compares the sentiment to 1997, just before the dot-com bubble inflated to its peak. However, he clarified, “We are currently in the early days and not yet at nutty valuation levels, so I'm not ringing the alarm bells for an immediate correction.”
What alarms Marks most isn’t the high valuation of tech giants, but that “high valuations are being applied to more average companies.” This widespread embrace of rich multiples signals a dangerous shift in investor psychology.
As a defensive strategy, he suggests investors add caution to their portfolios by shifting toward credit markets, which offer a “contractual rate of return” that equities do not. While still bullish on America long-term, Marks' message is clear: the same instincts that led him to bet big against the market in 2007 are now telling him it’s a time for defense.
Price Action
After returning 24.23% in 2023 and 23.31% in 2024, the S&P 500 index has risen 10.80% year-to-date in 2025. Meanwhile, the Nasdaq 100 was up 12.67% and the Dow Jones returned 7.62% YTD.
The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, rose on Thursday. The SPY was up 0.84% at $649.12, while the QQQ advanced 0.91% to $575.23, according to Benzinga Pro data.
On Thursday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading higher.
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