The Meb Faber Show - Better Investing Jim Masturzo - Fragile Markets, Strong Portfolios: 2025 Asset Allocation Playbook | #570
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Feb 14, 2025 Jim Masturzo, CIO of Multi-Asset Strategies at Research Affiliates, dives into the shaky foundations of U.S. markets with high valuations. He discusses the stark investment landscape in China and India, emphasizing the need for portfolio diversity. Masturzo critiques private equity expectations versus public market realities and sheds light on the complexities of fixed income dynamics. He questions the optimistic outlook on AI's impact on productivity while offering strategies for risk management and effective asset allocation in today's volatile environment.
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60/40 Focus
- Investors often fixate on the "death of the 60/40" portfolio more than its origins.
- The 60/40 portfolio has performed exceptionally well recently, making diversification seem unnecessary for some.
US Market Fragility
- Despite a long bull run, high CAPE ratios suggest US markets are overvalued by 20-25%.
- Market fragility is increasing, making a reversion to more reasonable valuations likely.
China-India Divergence
- China's and India's CAPE ratios have diverged significantly, with India's now at 35 and China's near single digits.
- This divergence highlights the importance of considering individual country dynamics, rather than treating emerging markets as a monolith.