Investing

Warren Buffett, Howard Marks, Ray Dalio: What top investors are saying about the stock market

The stock markets have been seesawing and many experts are as flummoxed. Here's what leading investors Warren Buffett, Ray Dalio, and Howard Marks have to say.

Warren Buffett.
Gerard Miller | CNBC

The coronavirus pandemic has short-circuited the markets for the past several months, causing both huge crashes and monster rallies. And the U.S. is still "not in total control" of the outbreak, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases and a White House health advisor, recently told a Senate panel. As cases have surged in recent weeks, some states have been forced to bring back business restrictions and lockdowns.

Suffice it to say, it's incredibly difficult to know what's going to happen next, and it can be even more difficult to try and plan your financial or investing moves as a result. Even many experts are having a hard time coming to grips with what's happening in the markets.

"I've never been more confused about what's going on," says Joe Williams, director of investment strategy at Missouri-based Commerce Trust Company. "This is my 40th year of doing it, and I have to say I'm surprised with the market rebound — and the strength of it, and how it continues to hold up with all the social unrest on top of everything else."

If it's hard for the experts, the average, everyday investor may not know what to do or where to turn.

Many people will take cues from big-name investors like Warren Buffett. Buffett, a billionaire investor and the chairman of Berkshire Hathaway, has the power to move the markets all on his own, and because of his long track record of investing success, has garnered an immense following in the financial world.

For some guidance, here's what Buffett and some other notable and successful investors have said about the current state of the markets and how they think investors should prepare for the remainder of 2020.

Warren Buffett: 'You can bet on America'

At the beginning of May, Berkshire Hathaway held its annual meeting  — a virtual meeting, for the first time in history. Buffett offered up his latest comments and thoughts about the markets. His main takeaway: Stay optimistic.

"I don't believe anybody knows what the market is going to do tomorrow, next week, next month, next year," he said.  "You can bet on America, but you have to be careful about how you bet. Simply because markets can do anything. ... Nobody knows what's going to happen tomorrow."

Because it's hard to predict the future, Buffett says investors should make smart bets by investing in broad, diversified index funds, rather than single stocks.

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"With the exception of Berkshire, I would not want to put all my money in any one company," he said during Berkshire's annual meeting. "In my view, for most people, the best thing to do is to own the S&P 500 index fund."

If you had followed that advice and invested $500 in an ETF that tracks the S&P 500 a decade ago, you'd have more than tripled your money by now.

Ray Dalio: Investors could be looking at 'a lost decade'

Ray Dalio is the founder of Bridgewater Associates, the world's largest hedge fund, which manages about $150 billion in global investments. He's also an author, having written bestsellers like "Principles: Life and Work."

Investors tend to listen when Dalio has insight to share. Unfortunately, Dalio's not as optimistic as Buffett when it comes to the current state of the markets. Investors could be looking at "a lost decade" in terms of returns, according to a June 16 note he wrote to clients obtained by Bloomberg News.

Dalio's company was hit particularly hard during the pandemic: Its assets declined 15% during the market sell-off in February and March. His report also mentions that globalization may have "already peaked," which could shake up supply chains and create further problems (and additional costs) for businesses in the future, according to Bloomberg News.

Bridgewater's team is cautioning investors that it may be some time before the markets stabilize and other big-time investors share their concerns.

Fortunately, for most young investors and those who have long-term goals, the current turmoil doesn't mean you need to change your strategy. And, some experts have pointed out, a rough time for the market at large can be a great time to get started as an investor.

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Howard Marks: 'The odds aren't in investors' favor'

Howard Marks, a billionaire and founder of the investment firm Oaktree Capital, regularly writes memos to his clients to share his insight about the state of the markets. His most recent memo, published on June 18, spells out just how unusual the current economic situation is, and how Marks feels that many investors may have gotten out in front of their skis when anticipating a recovery.

"The world is combating the greatest pandemic in a century and the worst economic contraction of the last 80+ years," Marks writes. "And yet the stock market — supposedly a gauge of current conditions and a barometer regarding the future — was able to compile a record advance and nearly recapture an all-time high that had been achieved at a time when the economy was humming, the outlook was rosy, and the risk of a pandemic hadn't registered."

Marks goes on to say that he thinks that some investors' fear of missing out on an imminent market recovery — "FOMO," as it's commonly called — has superseded the fear of losing money by making a bad investment.

While investors would benefit from taking the time to read through the whole memo, Marks' conclusion is that stock prices are high given the realities of the markets, and that investors should proceed with caution until we have more certainty around the pandemic. "The fundamental outlook may be positive on balance," he writes, "but with listed security prices where they are, the odds aren't in investors' favor."

It's important to remember, however, that investors like Buffett, Dalio, and Marks aren't infallible. To make the investing choices that are best for you and your future, consider what experts and top investors say — but always do your own research, too, and perhaps check in with a financial professional you trust.

After all, "everybody makes mistakes," says Williams.

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