“I think everyone knows what they’re supposed to do here,” says Cliff Asness, the co-founder of quantitative investing group AQR. Markets generally are now so expensive that the expected return on a 60/40 portfolio (that is, the traditional mix of 60% global equities, 40% global government bonds) “is at a record low”. Meanwhile, “value” stocks are as cheap relative to “growth” stocks, such as Tesla, as they were in the 1990s tech bubble.
Anyone paying attention to history would at least have to consider “lightening up” on growth and sticking to, or even adding to, their positions in value. Yet, while value has started to make a bit of a comeback since November, it’s only been a modest rebound and has left AQR’s overall portfolio underperforming badly in what has been a strong year for most strategies.
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