Christian Mueller-Glissmann of Goldman Sachs Research discusses asset allocation with the risk of "fat and flat" markets in this video.
Christian discusses how equities look expensive as they are well above the 90th percentile in terms of their Shiller PE and bond yields are close to all time lows.
Christian discusses comparable periods in history that are similar. In the golden 20's equities were expensive, there was disinflation after WWI for a decade. This boosted bonds and equities, which ended badly in the great depression.
The fear one has now is that you face these tail risks that growth will fall off a cliff and you don't have protection from the bond market. If you do see inflation return, equities will suffer because of lower yields.
Christian says equities are likely to be stuck in "a fat and flat range". By this he means stocks will have below average returns and above average volatility. The sharpe ratio, he predicts, will come down.
