Nobody Knows Yet: Howard Marks' Timeless Wisdom in an Age of Uncertainty

 

The Oracle Who Admits He Cannot See: Marks' Intellectual Honesty

In the investment world, where confident predictions are rewarded and uncertainty is viewed as weakness, Howard Marks stands apart with his refreshing intellectual honesty. The co-chairman of Oaktree Capital Management has built his legendary reputation not on claiming prescience but on acknowledging its impossibility. His recurring memo theme—"Nobody knows yet"—represents more than a catchphrase; it embodies a profound investment philosophy that has proven its worth through multiple economic crises.

First prominently deployed in his September 19, 2008, memo following Lehman Brothers' collapse, this phrase resurfaced in March 2020 amid the COVID-19 pandemic, and again in April 2025 as the US-China tariff war intensified. Across these vastly different crises, Marks' core insight remains unchanged: at true economic inflection points, traditional forecasting tools fail. The interconnected nature of global markets creates complex, unquantifiable ripple effects that even the most sophisticated models cannot capture.

Marks' perspective challenges the investment industry's fundamental premise that expertise equates to predictive power. Instead, he suggests that true investment wisdom lies in recognizing the limits of knowledge and building strategies that acknowledge uncertainty rather than deny it. This approach does not counsel paralysis but rather thoughtful action within acknowledged constraints.

The persistence of this theme across three distinct economic watersheds—spanning nearly two decades—demonstrates its enduring relevance. In each instance, conventional wisdom and expert forecasts proved woefully inadequate in anticipating how events would unfold. By consistently highlighting this pattern, Marks provides a valuable service to investors who might otherwise be misled by illusory certainty.

What makes Marks' perspective particularly valuable is that it comes not from an academic or critic on the sidelines, but from a highly successful practitioner managing billions of dollars. His willingness to acknowledge uncertainty while still making consequential investment decisions offers a practical template for navigating turbulent markets without succumbing to either reckless confidence or paralyzing fear.

Three Waves of Chaos: Unpacking the Major Economic Turning Points

The three crises Marks has addressed with his "Nobody knows yet" framework represent distinct challenges to the global economic order, each with its own catalysts, trajectories, and implications. Understanding their similarities and differences provides crucial context for applying his insights to the current environment.

The 2008 Financial Crisis: The Foundation Cracks

The 2008 crisis represented a fundamental breakdown in the financial system's architecture. Beginning with the collapse of the subprime mortgage market, it escalated dramatically with Lehman Brothers' bankruptcy, revealing the systemic risks that had accumulated through financial deregulation, excessive leverage, and misaligned incentives.

What made this crisis particularly confounding was the complex web of counterparty relationships that obscured risk exposure. As Marks noted in his original "Nobody Knows" memo, the domino effect of institutional failures created a situation where even sophisticated market participants could not trace the full implications of each collapse. When trust evaporated from the system, liquidity disappeared with it, creating a self-reinforcing downward spiral.

The stock market's reaction was severe, with the S&P 500 ultimately losing over 50% of its value from peak to trough. The cryptocurrency market, still in its infancy with Bitcoin priced below $1, remained largely unaffected and peripheral to mainstream financial considerations.

The 2020 COVID-19 Pandemic: The World Stops

Unlike the 2008 crisis, which originated within the financial system, the COVID-19 pandemic represented an external shock that brought global economic activity to an unprecedented halt. As Marks observed in "Nobody Knows II," this created a fundamentally different type of uncertainty—not about financial system stability but about the very nature of economic activity in a locked-down world.

The pandemic introduced novel questions: How long would lockdowns last? How would consumer behavior permanently change? What industries might never recover? These questions lacked historical precedents, making traditional forecasting methods particularly unreliable.

Stock markets reacted with exceptional volatility, with the fastest 30% decline in history followed by a remarkable recovery. The cryptocurrency market, now more developed than in 2008, initially moved in tandem with stocks but later decoupled, with Bitcoin ending 2020 up over 300%, establishing its potential role as a hedge against unprecedented monetary expansion.

The 2025 US-China Tariff War: The Order Unravels

The current crisis stems from a fundamental reshaping of the global trade architecture that has underpinned decades of economic growth. With the US imposing tariffs up to 145% on Chinese goods and China retaliating with 125% tariffs on American products, we are witnessing the unwinding of globalization's core assumptions.

In his April 2025 memo "Nobody Knows (Yet Again)," Marks emphasizes the unprecedented nature of this development, noting that it represents a deliberate policy choice to reverse decades of increasing economic integration. The second and third-order effects—from supply chain reorganization to inflation dynamics to geopolitical realignments—create layers of uncertainty that resist quantification.

Stock markets have responded with heightened volatility, with significant declines following escalatory announcements and temporary rallies when tensions briefly ease. The cryptocurrency market has demonstrated greater sensitivity to this crisis than previous ones, with Bitcoin dropping over 21% and broader crypto markets experiencing sharp corrections, reflecting their increased integration with the global financial system.

Across these three crises, a common thread emerges: the breakdown of prevailing paradigms creates ripple effects that even sophisticated financial models cannot capture. As complex systems enter uncharted territory, the only certainty becomes uncertainty itself—precisely the insight at the heart of Marks' recurring theme.

Markets in the Mirror: How Stocks Reflect Uncertainty

The stock market's response to the current US-China tariff war reflects the profound uncertainty Marks has highlighted. Recent data shows global stock markets plummeting following China's retaliatory tariff announcements, with the S&P 500 and Dow Jones experiencing significant declines. These movements represent more than normal volatility—they signal a fundamental repricing of risk as investors grapple with a new economic reality.

Particularly telling is the behavior of bond markets, where yields on US government debt have increased despite stock market weakness—an unusual pattern that suggests investors are questioning the traditional safe-haven status of US Treasury securities. This concern likely stems from the dual impact of tariffs: they simultaneously increase inflation pressures (negative for bonds) while threatening economic growth (typically positive for bonds). The market's struggle to reconcile these contradictory signals embodies the uncertainty principle Marks has articulated.

The market's hypersensitivity to policy announcements further demonstrates this uncertainty. When tariffs are temporarily walked back, markets rally dramatically, only to reverse course when confrontational rhetoric resumes. This pattern of sharp reversals indicates that investors lack conviction about the long-term trajectory, precisely because, as Marks suggests, nobody truly knows the ultimate implications of this trade confrontation.

Historical parallels show similar patterns during previous crises. In 2008, markets swung wildly as participants attempted to assess which financial institutions might survive and which government interventions might succeed. In 2020, markets initially plunged as lockdowns spread globally, then recovered as monetary and fiscal stimulus provided a temporary floor.

What distinguishes the current situation is its explicitly political nature. Unlike natural disasters or even financial system failures, trade wars reflect deliberate policy choices that can be escalated, de-escalated, or reversed based on political calculations. This introduces an additional layer of uncertainty that makes the current market environment particularly challenging to navigate.

Market indicators also suggest increasing concerns about recession risk. The yield curve's behavior, declining consumer confidence metrics, and defensive positioning among institutional investors all point to growing anxiety about economic contraction. Yet as Marks would emphasize, these indicators themselves reflect collective uncertainty rather than definitive knowledge about future outcomes.

Crypto in Crisis: Digital Assets at the Crossroads

The cryptocurrency market's reaction to the tariff war reveals its evolving relationship with traditional financial markets and global economic forces. With Bitcoin plunging over 21% and Ethereum and altcoins posting significant losses, the sector demonstrates that it remains vulnerable to broad risk-off sentiment despite its supposed design as an alternative financial system.

This sensitivity represents a marked evolution from previous crises. In 2008, Bitcoin had just been conceptualized, and the cryptocurrency ecosystem barely existed. By 2020, the market had matured significantly but still demonstrated some independence from traditional markets after the initial correlation during the March crash. In 2025, however, cryptocurrency appears more tightly coupled with broader market sentiment, suggesting increasing integration into the mainstream financial ecosystem.

The current crypto market decline reflects several factors aligned with Marks' uncertainty framework:

1. Liquidity Withdrawal: As investors move capital to safer assets like bonds and gold, speculative investments typically face selling pressure. Cryptocurrencies, despite their evolution, still carry higher perceived risk profiles than traditional assets.
2. Economic Growth Concerns: Cryptocurrencies, particularly application-focused blockchains and tokens, rely on user adoption and ecosystem growth. Recession fears threaten this expansion narrative, undermining investment theses.
3. Regulatory Uncertainty: The tariff war adds another layer of complexity to an already complicated regulatory landscape for digital assets, particularly for projects with exposure to both US and Chinese markets or developers.

However, a countervailing narrative has emerged among some cryptocurrency proponents: that Bitcoin in particular could serve as a hedge against the inflation that typically accompanies trade wars. Tariffs essentially function as taxes on imports, raising consumer prices while potentially spurring monetary easing to offset economic damage. This combination of inflationary pressure and monetary expansion creates theoretical conditions where scarce assets like Bitcoin could outperform.

This tension between short-term correlation with risk assets and long-term potential as an inflation hedge exemplifies the uncertainty Marks highlights. As James Butterfill from CoinShares suggests, Bitcoin could potentially rise as an inflation hedge over time, but short-term volatility remains high. This perfectly illustrates Marks' point that during major economic shifts, even assets designed to serve as hedges behave unpredictably as market participants struggle to price novel risks.

The current crypto market behavior underscores a fundamental truth aligned with Marks' philosophy: during periods of significant economic recalibration, no asset class is immune to uncertainty, regardless of its design intentions. The theoretical benefits of cryptocurrency as a hedge against traditional financial system risks must be weighed against its practical behavior during actual market stress.

Building an Uncertainty-Proof Portfolio: Marks' Practical Wisdom

Howard Marks' "Nobody knows yet" philosophy does not counsel paralysis but rather a specific approach to portfolio construction that acknowledges uncertainty while still enabling decisive action. His advice, refined through multiple crises, offers a practical framework for navigating the current environment.

Embrace Intellectual Humility

Marks' first and perhaps most important lesson is to recognize the limits of forecasting during paradigm shifts. Rather than seeking analysts with the most convincing predictions, investors should favor those who acknowledge the range of possible outcomes and the uncertainties involved. This intellectual humility forms the foundation for sound decision-making amid chaos.

Diversification With Purpose

While diversification is standard investment advice, Marks advocates for diversification with a specific focus on uncorrelated risk exposures rather than simply holding different asset classes. In the current environment, this might mean including assets like bonds or gold that have historically responded differently to trade restrictions and inflation pressures than equities. The goal is not to eliminate volatility but to ensure that no single economic scenario proves catastrophic for the entire portfolio.

Liquidity as Strategic Weapon

Throughout his memos, Marks emphasizes the value of maintaining liquidity during uncertain times—not merely as a defensive measure but as an offensive capability. During the 2008 crisis, Oaktree raised a $10 billion distressed debt fund, positioning itself to acquire assets at depressed valuations when others lacked the capacity to invest. Similarly, in the current environment, maintaining cash reserves creates optionality to exploit opportunities that arise from market dislocations.

Avoid Panic Selling

Marks consistently warns against emotional decision-making during market turbulence. In his memos, he argues that the natural human reaction to sell when markets decline often leads to locking in losses and missing subsequent recoveries. Instead, he advocates maintaining long-term investment discipline, potentially even increasing positions in quality assets that have been indiscriminately marked down.

Seek Opportunities in Misunderstood Risks

One of Marks' most distinctive insights is that market overreactions create specific opportunities where risks are overpriced. He refers to these as situations where "babies are thrown out with the bathwater"—entire sectors or asset classes punished due to association rather than fundamental exposure to the crisis at hand. In the current tariff war context, this might include companies with limited direct exposure to US-China trade but that have nonetheless been sold off with broader indices.

Cryptocurrency Considerations

For crypto investors specifically, Marks' uncertainty framework suggests several approaches:

1. Size Positions Appropriately: Given crypto's demonstrated volatility during this crisis, position sizes should reflect the potential for extreme moves in either direction.
2. Focus on Fundamentals: Rather than trading based on short-term price action, evaluate projects based on their long-term utility and adoption potential independent of immediate market reactions.
3. Consider Uncorrelated Protocols: Within the crypto ecosystem, some projects may have more insulation from global trade tensions than others based on their use cases and geographic exposure.
4. Maintain a Long-Term Perspective: If viewing Bitcoin or other cryptocurrencies as potential inflation hedges during trade wars, recognize that this thesis may take time to manifest, requiring patience through interim volatility.
   
   

Stay Informed, Not Overwhelmed

Marks advocates for staying informed about economic developments without becoming paralyzed by the constant flow of information. In the current context, this means monitoring key indicators of the trade war's progression—tariff announcements, supply chain shifts, inflation data—while maintaining perspective on their relevance to specific investments.

By applying these principles, investors can navigate the current uncertainty without requiring precise predictions about how the US-China tariff war will ultimately resolve. This approach acknowledges that while "nobody knows yet" the final outcome, thoughtful positioning can create resilience across multiple potential scenarios.

Lessons From the Edge: What Previous Crises Teach Us

Each of the three major economic turning points Marks has addressed offers distinct lessons that can inform our approach to the current environment. By examining how various strategies performed during previous episodes of extreme uncertainty, we can extract practical insights for navigating the present tariff-induced turbulence.

The 2008 Financial Crisis: Liquidity Is Sovereignty

The most profound lesson from 2008 was the paramount importance of liquidity when markets seize. Those who entered the crisis with excessive leverage or illiquid positions faced forced selling at precisely the worst moment, while those with available capital could acquire distressed assets at historic discounts.

This lesson manifested dramatically for Oaktree Capital itself, which raised its largest distressed debt fund just before the crisis peaked. The firm's ability to deploy capital when others could not created the foundation for exceptional returns in subsequent years. This experience directly informs Marks' current emphasis on maintaining liquidity amid tariff-induced uncertainty.

The 2008 crisis also demonstrated that correlations tend to converge during severe market stress—previously uncorrelated assets suddenly moved together as investors sought cash at any cost. This pattern suggests that traditional diversification may provide less protection than expected during acute phases of the current crisis, reinforcing the need for genuine liquidity rather than just theoretical diversification.

The 2020 COVID-19 Pandemic: Speed Creates Opportunity

The COVID market crash revealed a new dynamic: in the age of algorithmic trading and instant information, market dislocations can occur and resolve with unprecedented speed. The fastest 30% market decline in history was followed by one of the most rapid recoveries, creating a narrow window for decisive action.

This compressed timeframe meant that investors who hesitated—waiting for clarity that never fully arrived—missed significant opportunities. Those who acted decisively, accepting the inherent uncertainty Marks describes, generally fared better than those who sought perfect information before investing.

The pandemic-era markets also highlighted the powerful impact of fiscal and monetary intervention, which ultimately overwhelmed fundamental economic concerns. This dynamic may prove relevant in the current tariff war if governments deploy stimulus to offset trade-related economic damage, potentially creating market outcomes that seem disconnected from apparent economic realities.

Applying Historical Lessons to the Tariff War

Combining these insights with Marks' uncertainty framework suggests several approaches to the current environment:

1. Maintain Strategic Liquidity: Rather than fully deploying capital despite market declines, reserve capacity for potential deeper dislocations or specific opportunities that emerge as the tariff situation evolves.
2. Act Decisively When Opportunities Appear: When assets reach valuations that offer compelling risk-reward profiles even under pessimistic scenarios, act without waiting for perfect clarity about the trade war's resolution.
3. Watch Policy Responses: Monitor how central banks and governments respond to tariff-induced economic pressure, as their interventions may ultimately drive market outcomes more than the direct economic impact of tariffs themselves.
4. Recognize Sentiment Cycles: Markets tend to oscillate between extremes of fear and optimism during extended crises. The current tariff situation may create similar oscillations as negotiations progress, regress, and progress again, offering tactical opportunities for prepared investors.
5. Focus on Fundamentals With Staying Power: Prioritize investments in businesses and assets with durable competitive advantages that can withstand prolonged trade disruptions, rather than those dependent on specific trade patterns that may permanently change.

These historical lessons, viewed through Marks' "Nobody knows yet" framework, suggest that while the specific contours of the current crisis differ from previous ones, the fundamental approach to navigating uncertainty remains consistent: maintain flexibility, recognize the limits of prediction, and position for resilience across multiple scenarios rather than optimizing for a single forecast.

The Uncertain Future: Navigating What Lies Ahead

As we look beyond the immediate market reactions to the US-China tariff war, several potential scenarios emerge, each with distinct implications for investors. While Marks would caution against overconfidence in any specific forecast, understanding the range of possibilities helps construct portfolios resilient to multiple outcomes.

Scenario 1: Prolonged Trade Conflict

If the current tariff levels persist or escalate further, we could see a fundamental restructuring of global supply chains, with manufacturing shifting to third countries, increased reshoring efforts, and higher structural inflation. This scenario would likely create sustained pressure on corporate margins, particularly for businesses with complex international supply chains, while potentially benefiting domestic manufacturers and countries that can serve as alternative production bases.

The cryptocurrency market in this scenario might eventually benefit from inflation concerns, but would first likely experience continued volatility as liquidity conditions tighten during the economic adjustment. Bitcoin's narrative as "digital gold" would be tested against its still-strong correlation with risk assets.

Scenario 2: Negotiated Compromise

A second possibility involves a negotiated reduction in tariffs that preserves some elements of the pre-conflict trading relationship while addressing specific bilateral concerns. This outcome would likely trigger a significant market rally across both stocks and cryptocurrencies, as risk premiums compress and liquidity concerns ease.

However, even this more optimistic scenario would likely leave lasting changes in supply chain management, with companies prioritizing resilience and geographic diversification over maximum efficiency. The cryptocurrency market might benefit from renewed risk appetite but would face questions about its value proposition in a less inflationary environment.

Scenario 3: Economic Crisis Catalyst

Perhaps most concerning is the scenario where tariff-induced disruptions combine with existing financial system vulnerabilities to trigger a broader economic crisis. With global debt at historic highs and central banks already maintaining large balance sheets, the policy response toolkit appears more limited than in previous crises.

In this scenario, correlations across asset classes would likely increase dramatically during the acute phase, with cryptocurrencies potentially suffering alongside traditional risk assets despite their theoretical appeal as alternatives to the fiat financial system. However, the subsequent policy response—likely involving significant monetary expansion—could eventually create conditions favorable for scarce-asset cryptocurrencies like Bitcoin.

Navigating the Possibilities

Consistent with Marks' philosophy, the prudent approach is not to bet everything on any single scenario but to construct portfolios with elements that could perform under multiple outcomes. This might include:

1. Core Resilient Positions: Investments in businesses with pricing power, strong balance sheets, and adaptable supply chains that can weather prolonged trade disruptions
2. Tactical Opportunity Allocations: Capital reserved for specific dislocations that arise as markets overreact to trade developments
3. Strategic Hedges: Positions explicitly designed to benefit from inflation, supply chain reconfiguration, or other second-order effects of the tariff conflict
4. Cryptocurrency Allocation Calibration: Sizing crypto positions to reflect both their potential as monetary system hedges and their demonstrated volatility during market stress

Throughout this period of extended uncertainty, Marks would likely advise maintaining investment discipline while avoiding overconfidence in any particular economic forecast. As he noted in his April 2025 memo, the unraveling of established global trade patterns creates ripple effects that even the most sophisticated models cannot fully capture.

Conclusion: Wisdom in Uncertainty

Howard Marks' recurring theme—"Nobody knows yet"—provides more than a cautionary note about forecasting limitations; it offers a framework for thoughtful investment during periods of profound uncertainty. By acknowledging the inherent unpredictability of major economic turning points, investors can free themselves from the impossible quest for perfect foresight and instead focus on positioning for resilience across multiple scenarios.

The current US-China tariff war, like the 2008 financial crisis and 2020 pandemic before it, represents a paradigm shift that defies conventional analysis. Traditional models struggle to capture the complex interplay of economic dislocation, policy response, and market psychology that characterizes such periods. In this environment, Marks' intellectual humility becomes not just a philosophical stance but a practical advantage.

For investors navigating today's markets, the key lessons from Marks' approach include:

1. Embrace Uncertainty: Rather than seeking illusory certainty, acknowledge the range of possible outcomes and position accordingly.
2. Maintain Flexibility: Preserve liquidity and adaptability to respond to emerging opportunities and threats.
3. Focus on Value: Seek situations where assets are priced with excessive pessimism, creating favorable risk-reward even across multiple scenarios.
4. Practice Patience: Recognize that major economic adjustments take time to fully manifest, requiring investment discipline through periods of volatility.

As markets continue to react to developments in the US-China trade relationship, those who internalize Marks' wisdom will neither panic during downturns nor become complacent during rallies. Instead, they will maintain a balanced perspective informed by historical patterns while remaining open to the unique characteristics of the current situation.

In a world where financial media and market participants constantly demand predictions, Marks' willingness to say "Nobody knows yet" represents not a capitulation but a more sophisticated understanding of markets. It is precisely this recognition of uncertainty's centrality to investing that has made his perspective so valuable across multiple crises and why it remains essential as we navigate the uncharted waters of today's global economic realignment.