Oakmark is the mutual fund family launched in 1991 by Harris Associates, the Chicago deep-value firm founded in 1976 (about $105bn AUM). Bill Nygren runs the flagship Oakmark Fund and David Herro the Oakmark International Fund, buying businesses at large discounts to intrinsic value and holding them like owners — publishing quarterly fund commentaries, market commentaries and insight articles.
This report explains what happens when interest rates peak. The author argues that recent bank crises (like Silicon Valley Bank's failure) are actually a healthy part of the tightening process. Inflation may fall without causing a big recession, and company fundamentals (like cash flow and profits) are stronger than expected. For regular investors, don't panic over daily headlines—focus on long-term value. High-quality bonds (like investment-grade bonds) may be worth looking at now, but be cautious with bank stocks and loans, as banks will lend more conservatively.
Oakmark's 1Q23 report explores investment strategies during the peak phase of the interest rate cycle. The core argument is that in the current high-inflation environment, central banks face a dilemma between price stability and financial stability, with the recent regional banking crisis being an u
This chapter focuses on the investment environment at the peak of the current interest rate cycle. The report notes that the recent regional banking crisis has revealed hidden vulnerabilities within the aggressive rate-hiking cycle, while central banks face a dilemma between price stability and financial stability—one of the most complex policy challenges in the post-Volcker era (under high inflation).
The author's central judgment is that inflation may naturally decline without triggering a severe recession, and corporate fundamental data (cash flow, capital allocation, CEO confidence) indicate that the negative effects of policy tightening are relatively mild. The counterintuitive point is that, despite the risks exposed by the banking crisis, the author believes addressing excesses and vulnerabilities in financial markets one by one is not only a tolerable consequence of tightening policy but even a healthy and welcome development. In the near term, the Federal Reserve will still prioritize controlling inflation (to avoid becoming the first central bank in 40 years to lose control), so the market may experience further negative shocks.