Wall Street renowned quant investor: US stock valuations are high but have not yet formed a bubble.

Cliff Asness, co-founder of the American quantitative investment giant AQR Capital Management, stated that the current valuation of the US stock market is at a historically high level, but has not yet reached a level that could be considered a "bubble." The renowned quant investor said on Monday that the valuation gap between the most expensive and cheapest stocks in the market is currently around the 75th to 80th percentile, meaning that historically, only about a quarter of the time has this gap been larger. Asness has long considered this indicator as a signal for his preferred "value investing strategy," which tends to buy undervalued stocks. Asness said, "Investors are paying higher prices for the stocks they like, more than before." "This is usually a positive signal for value investing. However, this strategy has not been effective yet, and I wouldn't say we are at bubble levels now." He also noted that on the whole, the cyclically adjusted Shiller P/E ratio remains high, which "makes him somewhat uneasy." Asness's comments reflect a broader investor divergence on how to interpret high stock valuations in a time of rapid technological advancement. While the valuation gap remains significant, strategies based on this gap (such as value investing) have recently underperformed, raising questions about whether traditional indicators are still effective in a market driven by AI concepts and retail funds. As a systematic trading institution, AQR relies entirely on computer models for stock and cross-asset futures trading, with its model incorporating multiple signals including the valuation gap. Thanks to the performance of its stock selection and trend-following strategies, AQR's multi-strategy fund, Apex, achieved a return of 15.6% as of the third quarter of this year. Asness stated that in his career, he has only "clearly called a bubble" twice: once during the Internet bubble era, and the other time in 2019 - "probably a year early." He said, "Very high valuations do not mean the stock market is about to crash, but it may mean that returns over the next decade will be disappointing." It is worth noting that several major banks have recently countered the "AI bubble narrative." Last week, as global stock markets continued to retreat from historical highs due to the "AI bubble narrative," Citi's senior US equity strategist Drew Pettit pointed out that "a lot of good news has already been factored into market prices," but he emphasized that short-term market weakness/downward pullbacks may be within the general expectations of investors, and the "AI fundamental narrative" supporting the long-term bull market in stocks remains intact, which could create significant buying opportunities during the retreat. JPMorgan also sees investment opportunities in the concerns about the sustainability of AI trading. Analysts led by Andrew Tyler, head of global market intelligence at JPMorgan, wrote, "We will be buying on dips before the end of the year." The analysts believe that the bull market in US stocks remains intact, and they expect the S&P 500 index to break through the 7,000-point mark "strongly" in the short term. This implies a further 3% increase from the current level. The bank's optimism about the prospects of US stocks is based on strong US economy, strong corporate earnings, and key headwinds dissipating. Goldman Sachs also released a research report stating that there is still room for advancement in the AI investment cycle, and the current surge in AI spending and valuations is likened to the early stages of the late 1990s tech boom rather than a speculative peak. Goldman Sachs pointed out, "From multiple indicators, the current AI-related boom is more similar to the tech boom of 1997 to 1998 than to the state of 1999 or 2000," when it was a period of the internet era construction, where progress in productivity and infrastructure sectors began to emerge, but market speculation had not yet formed.