Overvaluation Meets Macro Risk: Why This Massive Asset Manager is Getting Bearish | Jim Masturzo | Research Affiliates

Macroeconomic shifts and the rise of artificial intelligence are challenging traditional investment frameworks, particularly the efficacy of the 60-40 portfolio. Jim Masturzo, Partner and Chief Investment Officer at Research Affiliates, argues that positive stock-bond correlations require investors to seek true diversifiers, such as alternative risk premia and commodities, rather than relying on nominal bonds. While the AI narrative fuels market momentum and high valuations—evidenced by U.S. CAPE ratios reaching 40—enterprise-level productivity gains remain unproven. Software sector valuations, despite recent volatility, continue to trade at lofty multiples, prompting caution regarding reliance on analyst earnings expectations, which frequently fail to anticipate market turning points. Investors should prioritize fundamental economic footprints over market-cap weighting to navigate current market dislocations and potential commodity-driven inflation.