Stock values and many other asset values are too high, says Cliff Asness of AQR, a money management firm. But that doesn’t mean it is time to sell and hide in cash. Many assets values have been high for a long time. But high values alone don’t mean a decline is imminent. Asset prices could stay high for a long time, as they have the last few years for stocks. And they don’t have to end with a crash. There are other possibilities. So, keep an eye on prices and values, but don’t make that your only factor for deciding when to change a portfolio.
Although AQR admitted concern over valuations, Asness and his colleagues maintained that it did not mean a market crash or financial crisis was imminent.
“It could be the case that the world crashes, but it could be that things stay expensive and generate returns, but less than expected,” Asness said.
Michael Mendelson, principal, said investors had become complacent but “that doesn’t mean a bad event is more likely.”