The tailwinds of globalization are fading, and the world is entering a fragmented era. Changes in trade policies, rising tariffs, and increasing inflation pressures require investors to recalibrate their investment decisions.

Author: Kintsugi Investing

Translation: Baihua Blockchain

Recently, legendary investor Howard Marks shared his profound insights on the current investment environment in a Bloomberg program. He did not attempt to spread fear or predict short-term market movements, but rather focused on explaining how "liberation day" is redefining our thinking about investments.

Marks pointed out that the world is not coming to an end, but the rules of investing are undergoing fundamental changes. For the past few decades, investors have benefited from the tailwinds of globalization: open trade, efficient supply chains, and low commodity prices. However, this tailwind is gradually fading. Instead, we are entering a fragmented era. Countries are re-evaluating trade policies, tariffs are continuously rising, and domestic production is being prioritized, even if it means higher costs. This shift has profound implications for the economy, inflation, and asset prices.

Trade is not just a political issue; it is the engine of the economy. When countries achieve mutual benefits through specialization and efficient trade, everyone can benefit: lower prices, higher productivity, and broader access to goods. However, reversing this trend comes at a cost. One of the most underestimated impacts of globalization is its role in suppressing inflation. As global trade expanded, the costs of many goods significantly decreased, benefiting central banks, consumers, and investors alike. But when trade shrinks, cost pressures rise. Domestic manufacturing typically means higher wages, higher input costs, and lower efficiency. This is not necessarily a bad thing, but it is inflationary and alters the assumptions we have relied on for decades.

So how should investors respond? Marks emphasizes that we need to rethink the context of every investment decision. For example, if inflation is structurally higher, then valuation multiples may need to be adjusted downward, capital costs will rise, and discount rates will become important again. He is not saying to "sell everything," but rather suggesting that investors recalibrate their investment strategies and not rely on old models in the new world. Assume that mean reversion decreases, systemic changes increase, while remaining cautious about the risks taken.

Another key point is: in such an environment, predictions do not work. We cannot reliably predict what policies, partnerships, or power dynamics will look like in 6 to 12 months. This is not a flaw, but a reality. If precise predictions are not possible, what can we do? Marks believes we can rely on probabilities, positioning, and pricing to anchor ourselves. Instead of trying to predict, focus on whether the pricing of assets is reasonable relative to this new context, and then ask yourself: "Is this reasonable?"

When uncertainty is high, discipline becomes particularly important. Marks advises investors to view volatility as a lens for discovering opportunities rather than a reason to avoid. The best opportunities often arise when others are hesitant, but you must remain logical rather than emotional. Additionally, do not confuse price declines with rising risks. The market will discount; this is part of the cycle. The key question is not "Will it drop lower?" but "Am I being fairly compensated for the risk I am taking?"

Despite these changes, Marks still believes that the United States is a strong place to invest. It has deep capital markets, world-class innovation, and the rule of law—though evolving, it still surpasses most alternatives. However, the label of "automatic best" no longer applies. What is needed now is judgment, not assumptions.

Howard Marks did not provide specific market predictions; he offered perspective. This moment requires not just reaction but a reassessment of how we invest—and why. The world is changing, and smart investors will adjust accordingly.

Article link: https://www.hellobtc.com/kp/du/04/5740.html

Source: https://s.c1ns.cn/60Tz9

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