How to Think When the World Doesn’t Make Sense

(Reading time: 7.5 mins)

On April 2, 2025, President Donald Trump announced what he called “Liberation Day.”

The headline:
A sweeping set of tariffs aimed at reshaping U.S. trade relationships.

✅ A universal 10% tariff on all imports
✅ “Reciprocal” tariffs targeting specific countries—most notably, a 54% cumulative tariff on Chinese goods

The market reaction was swift and brutal.
The Dow fell 1,500 points in a day.
Global stocks sold off sharply.
Commentators debated whether we were witnessing a necessary course correction—or the first act of a global trade war.

And yet, amid the noise, one of the clearest voices in investing cut through with insight, not alarm.

Howard Marks, co-founder of Oaktree Capital, came on Bloomberg to share his views.
He didn’t come to make bold predictions or sell panic.
He came to offer what great investors are best at:

Clear thinking in complex times.

Here are the most important insights from that conversation—and how they can reshape how we think about investing in a world that no longer plays by the old rules.

1. Liberation Day marks a regime change, not a headline event.

Markets are constantly digesting news.
But what happened on April 2nd wasn’t just another policy move.
It marked a break from the post-WWII economic consensus.

For 80 years, globalization was the dominant force shaping the global economy:
• Countries opened up
• Trade expanded
• Supply chains optimized for efficiency
• Goods became cheaper
• Inflation was subdued

Now, the U.S. is signaling a new direction: protectionism.

This isn't temporary turbulence—it’s a structural transition.
As Marks put it, it’s the biggest change in the investment environment he’s seen in his career.

2. Globalization quietly suppressed inflation. That force is gone.

Investors often think of inflation as a monetary phenomenon. But it's just as much about cost structures and trade flows.

Marks highlighted that from 1980 to 2005, durable goods prices fell ~40% in inflation-adjusted terms in the U.S. Why?
• Outsourced manufacturing
• Global labor arbitrage
• Cheaper imports from countries like China

The result?
An inflationary lid that kept prices low for decades—even as the Fed expanded its balance sheet.

Now, tariffs reverse that trend.
More production happens domestically, where costs are higher.
Fewer efficiencies.
More friction.
Prices rise.

This creates a stickier, more structural inflation regime—not necessarily runaway, but persistent.

3. Prediction becomes less useful the more the rules change.

In stable times, we extrapolate the future based on the past.
In unstable times, that mental shortcut breaks.

Howard Marks is not anti-analysis—he's anti-false certainty.

Trying to "measure" the impact of a paradigm shift is like trying to measure fog.
Instead of precision, he advocates judgment, context, and humility.

Forecasting GDP, interest rates, or earnings growth becomes far less valuable when the very assumptions those forecasts rely on—free trade, stable alliances, cheap capital—are in question.

This isn't about abandoning logic. It's about updating your tools.

4. Volatility is not a signal to run—it’s an invitation to think.

When prices fall, most investors instinctively get more cautious.
But price declines aren't always a signal of risk. Sometimes, they’re simply a discount.

Marks makes this point by flipping the narrative:
Would you avoid buying something you liked at $100 just because it's now $90?

This is investing 101, yet few follow it when emotions run high.
The best investors ask:
“Has the value changed—or just the price?”

That question becomes essential in today’s volatile world.

5. Focus on positioning, not predictions.

The era of set-and-forget investing is over.
Instead of relying on static assumptions, investors must focus on how assets are priced in relation to their risk and context.

Are you getting paid for the uncertainty you’re taking?
Is the price embedding a worst-case scenario—or ignoring it?

Rather than trying to pick winners, build a portfolio that’s resilient across outcomes.
• More optionality
• Shorter feedback loops
• Greater emphasis on fundamentals and durability

6. The U.S. remains a strong investment destination—but not by default.

Marks doesn’t dismiss the U.S. He still believes it’s probably the best place to invest.
But he adds an important nuance: it’s less best than it used to be.

What once made the U.S. so attractive—predictable legal systems, fiscal responsibility, and investor trust—is now under pressure.

The U.S. has, in his words, acted like someone with a golden credit card: unlimited spending, no bill.
But there may come a time when the bill does arrive.

This isn’t a call to abandon U.S. assets—but a nudge to be selective, not complacent.

7. Don’t anchor to the past. Understand what’s changing.

Marks reminded us that average equity returns of 10%—a figure widely cited—are deeply tied to valuation.

Today’s valuations are above historical averages.
If interest rates and inflation remain elevated, the return assumptions we’ve baked into our models may no longer hold.

Investors should challenge assumptions like:
• “Equities always outperform”
• “The U.S. is always the safest”
• “Globalization will always expand”

These may still be true.
But they may not be.

Resilient investors test their assumptions—then build around the ones that remain robust under pressure.

8. When the world feels unstable, mindset is your edge.

Howard Marks didn’t offer a 12-month outlook. He offered a lens.

And that’s what makes his thinking so valuable.

When others reach for certainty, he reaches for context.
When others try to guess the future, he asks better questions.
When others react, he observes.

In this moment of global uncertainty—rising tariffs, geopolitical fragmentation, and fiscal tension—those are the habits that matter.

Because strategy without mindset is just noise.

Final Thought

You don’t have to predict what happens next.
But you do have to decide how you’ll respond to what’s happening now.

Howard Marks reminds us that investing isn’t about being fearless—it’s about being thoughtful in the face of uncertainty.

The world may not make sense right now.
But your thinking still can.

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