Stocks soared higher in the last week of March but investors should not be surprised by another bout of market bloodshed, says Howard Marks. The Oaktree Capital founder's memos are always worth reading – "the first thing I open and read", Warren Buffett once said – and his latest, Which Way Now?, is characteristically nuanced, exploring multiple arguments advanced both by bulls and bears.

Optimists hope for the “early cessation of bad news and the arrival of better news in the not-too-distant future”; the virus gets brought under control within months, that the financial impact is sharp but brief as policymakers throw the kitchen sink at the economy. In the bear case, everything doesn’t go back to normal for at least a year or two, and the effects of the lockdown on businesses end up creating depression-like conditions.

While Marks was cautious during the global financial crisis, he notes everyday life was not nearly as impacted as now. There was “no obvious threat to life or limb” and the range of negative outcomes today – social isolation, disease and death, economic contraction, enormous reliance on government, uncertainty about the long-term effects – are particularly stark.

No one knows what will happen. Marks reckons risk assets at the peak of the recent rebound were fairly priced for the optimistic case but “didn’t give enough scope for the possibility of worsening news”. That means indices are vulnerable but for investors, “the most important thing is to be ready to respond to and take advantage of declines”.