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Billionaire quant Cliff Asness predicts stocks and bonds will offer only 2% real returns

    • AQR Capital's Cliff Asness shares his market views at the 2nd Annual Evidence-Based Investing Conference in New York on Thursday.
    • "More expensive markets lead to lower expected returns," he said. "Both stocks and bonds [will offer] lower expected returns than normal."
    Cliff Asness
    Chris Goodney | Bloomberg | Getty Images
    Cliff Asness

    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 that "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 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.