For decades, Howard Marks has warned investors of risks that markets might undervalue. His latest memo raises an especially uncomfortable question: What if America’s fiscal habits eventually undermine confidence in the dollar?
The Oaktree founder argued in the note that the major issue isn’t the U.S. stock market or American companies. It’s the government’s fiscal position and what that could ultimately mean for the currency.
That distinction poses a challenge for investors trying to protect themselves.
Marks said even if they sell U.S. stocks and put the proceeds into bank deposits, money market funds, or dollar-denominated bonds, investors haven’t necessarily escaped the underlying risk.
Howard Marks says problem starts with America’s “golden credit card”
In “Shall We Repeal the Laws of Economics – Part III,” Marks contended that the U.S. has greatly profited from the dollar being the world’s reserve currency.
He called that stance a “golden credit card” with practically no credit limit but thinks Washington has been using it unwisely.
Related: Louis Navellier’s stock scoring system spots 3 oil tanker stocks
What’s particularly striking about his criticism is that he thinks the U.S. is running large deficits at a time of prosperity, not just using deficit spending to soften an economic downturn.
In the first quarter of 2026, the dollar accounted for 57% of allotted government foreign-exchange reserves and was used in 89% of foreign-exchange transactions in 2025, Marks noted.
For now, he said, the dollar’s reserve currency position is difficult to replace. The euro is the second-largest reserve currency, while China’s yuan makes up only about 2% of allotted official reserves, Marks’ note explained.
Selling stocks doesn’t necessarily solve the problem
This is where Marks’ argument becomes more fascinating.
An investor worried about the fiscal deterioration of the U.S. may well sell equities and migrate into safer assets.
But Marks asks: Where does the money go?
The investor still faces a possible drop in the dollar’s buying value if the money goes into a bank account, money-market fund, or bonds denominated in dollars.
Instead, Marks outlined three major ways investors may lessen that specific exposure: assets denominated in other currencies, nonfinancial assets such as gold or non-U.S. real estate, and non-U.S. firms or cryptocurrencies.
But he does not offer them as simple answers.
Every investing alternative comes with another risk
Marks’ point is not that investors should just give up on the U.S.
Indeed, he noted that many overseas firms have lower development potential and smaller size than the best U.S. corporations. He also points out that some operate in more regulated and less business-friendly nations.
Emerging economies have the potential to expand faster, but their ability to do so is less clear, he argued.
More Economy:
- Kevin O’Leary raises stark concern about inflation
- Goldman Sachs delivers its verdict on inflation and jobs
- Bank of America issues stark warning on Fed and economy
That’s why Marks says he isn’t opposed to diversifying away from the currency altogether. Investors with little need for dollars may have motivation to own fewer dollar-denominated assets.
But he does not think that warrants shifting money out of U.S. assets in any great way, merely to avoid America’s financial woes.
The bigger risk may not be where investors expect
Marks’ recent statement leaves investors with a more complex issue than whether equities are safe or risky.
He emphasized that the asset risk and the currency risk are not the same.
A U.S. corporation can keep expanding if Washington’s budgetary condition worsens. At the same time, a dollar-denominated portfolio might still be subject to currency risk, even after an individual has sold equities.
Marks concluded that America’s fiscal trajectory will harm its creditworthiness, currency, and Treasury securities. He said selling dollar assets may not be the answer, especially since nobody knows when the problem will peak.
That’s Marks’ strange message for investors: The key choice may not be whether to get out of the stock market, but which danger they’re really attempting to avoid.
Related: Warren Buffett’s rules for investors starting with $10,000
