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Oaktree Capital co-founder Howard Marks Photo: Michael Nagle/Bloomberg via Getty Images

Turn on the TV any time these days, and you may hear someone sounding pretty certain about their view on the direction of inflation. That someone won’t be Howard Marks, veteran investor and billionaire co-founder of hedge fund Oaktree Capital.

Driving the news: Marks admits he doesn’t know what’s next for inflation. And he says in a memo that investors should put little weight in forecasts about the economy because he’s "convinced the macro future isn’t knowable."

Why it matters: The outlook for inflation is probably the most hotly debated topic in markets right now. Marks acknowledges that the chance of persistent inflation is among many risks that could lead to a market correction.

Catch up quick: Many, including Fed chair Jerome Powell, argue that elevated levels of inflation are transitory.

  • Others believe it’s much more long-lasting and may warrant the Fed to tighten monetary policy soon.

What he’s saying: In the memo, Marks examines whether inflation will prove transitory or permanent at great length and he concludes: "it’s impossible to know the answer."

  • "[T]he truth is that we know very little about inflation including its causes and cures," he writes. “That makes life tough for investors at the moment, because inflation and its impact on interest rates constitute the most important wildcards."
  • "It may be hard to admit — to yourself or to others — that you don’t know what the macro future holds, but in areas entailing great uncertainty, agnosticism is probably wiser than self-delusion."

The bottom line: It doesn’t make sense to cut back on market exposure based on inflation predictions that may — or may not — come true, Marks writes.

  • "The most important rule in investing is that we should commit for the long run, remaining fully invested unless the evidence to the contrary is absolutely compelling."

Go deeper

Oct 15, 2021 - Podcasts

Inflation: A cause for concern?

Inflation: A cause for concern? The global energy crisis is becoming a bigger problem for the economy. The Consumer Price Index — the best way to measure inflation in the U.S. — jumped 5.4 percent compared to last year in September, according to new data released this week. How is the Federal Reserve and the Biden administration reacting to this latest news?

Axios Re:Cap talks with Axios’ chief financial correspondent Felix Salmon who’s been reporting on the latest news.

This is what a profit margin squeeze looks like

Expand chart
Data: U.S. Bureau of Labor Statistics; Chart: Jared Whalen/Axios

Two inflation indexes out this week, taken together, show how companies’ margins are getting squeezed.

Why it matters: Corporate earnings growth, while still historically high, is receding from record second-quarter levels. Margins will be a huge focus during Q3 earnings calls this month.

Next big bet: Wagers rush in on Fed chair pick

Illustration: Aïda Amer/Axios

There are those speculating whether Fed chair Jerome Powell gets another term. Then there are those speculating with real money on the line.

Why it matters: The explosion in retail trading is one sign of the flush consumer's betting fervor. The amped up rush to wager on political outcomes — like who's next to lead the Fed — is another.