Howard Marks Sees a Bubble Brewing--And He's Not the Only One

Oaktree's Howard Marks (Trades, Portfolio) isn't screaming fireyetbut he's definitely pointing at the smoke. In a Wednesday interview with Bloomberg, the famed credit investor said U.S. equities are in the early days of bubble territory, with valuations that feel disconnected from reality. Some of the market's current behavior, he said, reminds him of the late '90s tech craze, when Alan Greenspan warned of irrational exuberanceand the market still marched on for years before collapsing. People get out of the habit of thinking about market corrections, Marks warned, adding that a reversion to the mean is not just possible, but likely.

What's fueling this exuberance? According to Marks, the market has been enjoying a relief rally since Donald Trump's April tariff announcement. But that rally, he argued in a recent memo, needs a firmer foundation to justify today's price levels. One red flag he's watching: the total market cap of U.S. equities has reached a record high relative to GDP. And with more companies being taken private or staying private longer, that figure could be even more distorted than it looks on the surface.

For investors looking to play defense, Marks is leaning into credit over stocks. Even with tight spreads, he sees credit as the safer corner of the room compared to richly priced equities like Tesla TSLA. He still calls the U.S. the best place in the world to invest, but with a twist: it's like buying a luxury car at full sticker pricestill world-class, just not cheap. The fundamentals may not be broken, but they're no longer doing all the heavy lifting.