Cliff Asness believes financial markets will offer weak returns from these levels.

“More expensive markets lead to lower expected returns,” Asness said at the 2nd Annual Evidence-Based Investing conference in New York on Thursday. He added “both stocks and bonds [will offer] lower expected returns than normal.”

Asness predicts investors with a balanced portfolio of stocks and bonds will only generate 2 percent real annual returns.

The portfolio manager warned however not to bet against or short the market.

“Don’t market time with this. Valuation of markets is a disastrous market timing tool and a super weak strategy,” he said. “Evidence is strong over long term, high CAPE [multiples mean returns for the] next 10 years are low.”

Nobel Prize-winning economist Robert Shiller developed the “cyclically adjusted price-to-earnings ratio” (CAPE) market valuation measure, which is calculated using price divided by the index’s average historical 10-year earnings, adjusted for inflation.

Asness is the founder and chief investment officer of AQR Capital Management, a leading quantitative investing firm. AQR has $208 billion of assets under management, according to its website.

Source: Investment Cnbc
Billionaire quant Cliff Asness predicts stocks and bonds will offer only 2% real returns