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Journal Article

Investing in Interesting Times

Given 2022’s cheapening of asset valuations, some have questioned if we are still in a world of low expected returns. We review what’s changed after 2022, showing that the lower expected return picture has not been substantially altered for many asset classes. We provide some suggestions to potentially ameliorate the pain caused by this environment.

Quick Clips

Quick Clips: 2023 Capital Market Assumptions for Major Asset Classes

Hear from Pete Hecht and Thomas Maloney as they provide short soundbytes based on our Q1 2023 Capital Market Assumptions for Major Asset Classes

Alternative Thinking

2023 Capital Market Assumptions for Major Asset Classes

We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes. We also include two special topics: one highlighting the case for emerging market equities, and the other assessing the impact of large interest rate rises on various risk premia.

Quick Clips

Quick Clips: New Rules of Diversification

Hear from AQR's Portfolio Solutions Group on the the prospects for stock and bond markets, the impact of macroeconomic risks on a range of investments, and the use of diversifying investments to fortify portfolios.

Alternative Thinking

New Rules of Diversification

During the first half of 2022, equity markets tumbled around 20% from their peak, with losses on typical stock/ bond portfolios almost as large. More worryingly, this type of downturn may be unfamiliar to many younger investors: with inflation still high, there is little prospect of central banks riding to the market’s rescue. We assess the prospects for stock and bond markets after the H1 selloff, consider the impact of macroeconomic risks on a range of investments, and explore the use of diversifying investments to fortify portfolios.

Quick Clips

Quick Clips: The Stock/Bond Correlation

For the past two decades, the stock/bond correlation (SBC) has been consistently negative, and investors have been able to rely on their bond investments for portfolio protection when equities sell off. However, macroeconomic changes – like heightened inflation risk – could push this key asset allocation input into positive territory.

Journal Article

A Changing Stock-Bond Correlation

For the past two decades, the stock/bond correlation – a fundamental detriment of risk in traditional portfolios – has been consistently negative. However, this hasn’t always been the case, and a positive stock/bond correlation could reappear due to macroeconomic changes. In this article, we assess the broad implications this would have for investors and set out practical steps to prepare for such an outcome.

Perspective

Everything and More

My colleague and former classmate Antti Ilmanen is at it again with his second book, Investing Amid Low Expected Returns. Very rarely does a sequel stand up to the original (see Jaws II), but that's certainly not the case here!

Quick Clips

Quick Clips: 2022 Capital Market Assumptions for Major Asset Classes

Performance of traditional stock/bond portfolios has been remarkable over the last decade, but the current outlook is more subdued. Hear from AQR’s Portfolio Solutions Group on some practical, incremental changes that could boost expected returns without adding substantial risk.

White Paper

Time to Diversify – But into What?

The last 10 years were exceptional for traditional stock/bond portfolios. But with stock market valuations near all-time highs and bond yields near all-time lows, prospective returns look bleak. We make the case for diversifying out of equities and explain the valuable role liquid alternative strategies can play.