Portfolio manager warns of an unfortunate market ‘asymmetry’

After eight solid months for the market, the odds are no longer in investors' favor, according to Doug Gordon, senior portfolio manager at Russell Investments.

"I think there's some asymmetry here," Gordon said Friday on CNBC's "Trading Nation." "Certainly the upside isn't equal to the potential for downside, when we look at it in a multi-asset context."

This unfortunate asymmetry comes on the back of — and indeed, is somewhat the result of — a significant rally.

"Most investors are in a position now where it would be safe to give away some of the upside potential to protect against the downside," Gordon wrote in a recent note to clients.

He pointed out that U.S. stock market valuations are high in a historical context and noted that bonds "look awfully expensive as well."

Indeed, with the 10-year U.S. Treasury yield approaching 2017 lows even as the economy appears to be on solid footing, Gordon prefers American stocks to bonds.

Yet "inside equity, we'd like to be outside the U.S., with an appropriate stake inside the U.S. as well," he added.

Specifically, he favors European stocks, which are generally lagging their U.S. counterparts.

More generally, Gordon says that due to the relatively expensive state of markets, "long-term returns are going to be somewhat challenged, compared to historic levels."

The S&P 500 is sitting on a 10.6 percent gain for the year.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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