Two of the biggest money managers have a message for investors: it’s time to dial back risk.
Investors should pare U.S. stocks and high-yield debt while shifting to lower-risk assets, such as Treasuries and mortgage-backed securities, according to an allocation report by Pacific Investment Management Co.
“Considering asset prices generally are fully valued, we are modestly risk-off in our overall positioning,” managing directors Mihir Worah and Geraldine Sundstrom wrote in the report released Wednesday. “We recognize events could still surprise to the upside, but starting valuations leave little room for error.”
T. Rowe Price Group Inc. echoed that view on prices as it cut the stock portion of its asset allocation portfolios to the lowest level since 2000. The Baltimore-based money manager said it also reduced its holdings of high-yield bonds and emerging market bonds for the same reason.
“Everything is expensive and we are late in the business cycle,” Sebastien Page, head of asset allocation at T. Rowe Price said in an interview. “That introduces fragility for risk assets and there isn’t much buffer.”