Overvaluation Meets Macro Risk: Why This Massive Asset Manager is Getting Bearish

Watch on YouTube ↗  |  May 31, 2026 at 15:10  |  1:18:47  |  Monetary Matters
Speakers
Jim Masturzo — CIO, Research Affiliates

Summary

Jim Masturzo of Research Affiliates discusses the breakdown of the traditional 60/40 portfolio, the range-bound nature of bond yields, and the overvaluation of US equities. He outlines bullish conviction on commodities due to supply chain risks and recommends TIPS for inflation protection, a tactical bond range trade, and long bonds at high yields as a recession hedge. The conversation also covers AI adoption skepticism and a neutral stance on software after a recent rally.

  • Stock-bond correlation has turned positive, undermining 60/40 diversification.
  • TIPS and commodities are recommended as true diversifiers due to expected higher inflation.
  • US 10-year yields are range-bound (3.75-4.75%) with government intervention likely to cap spikes.
  • Jim is bullish on commodities, citing geopolitical supply chain risks and depleted inventories.
  • He sees a tactical opportunity to buy long-term bonds when yields reach the upper fours.
  • US equity market is overvalued (CAPE 40) but not yet a short; AI trade may pull back.
  • Software sector went from overweight to neutral after a sharp sell-off and subsequent rally.
  • AI enterprise adoption remains underwhelming, and long-term multiples in software are worrying.
Trade Ideas
Jim Masturzo CIO, Research Affiliates 6:10
Buy TIPS for inflation protection
Inflation will be higher in the future due to persistent debt and deficits, so Treasury Inflation-Protected Securities (TIPS) provide built-in inflation protection and make sense as a diversifier in portfolios.
TIP MED
Jim Masturzo CIO, Research Affiliates 6:30
Buy 10-year when yields high
The 10-year Treasury yield has been range-bound between roughly 3.75% and 4.75% due to government intervention and economic constraints. A tactical trade of buying bonds when yields hit the upper end (4.75-5%) and selling when yields fall to the lower end (3.75-4%) can be profitable.
IEF HIGH
Jim Masturzo CIO, Research Affiliates 70:44
Commodities have another leg up
Commodities have another leg up driven by severe geopolitical supply chain risks (e.g., Strait of Hormuz tensions) and depleted inventories of oil, diesel, fertilizer, and other inputs. The bull case for energy and agricultural commodities is strong even if equity markets ignore it.
DBC HIGH
Jim Masturzo CIO, Research Affiliates 71:14
Buy long bonds at high yields
If commodity supply shocks trigger an economic pullback or recession, long-term bond yields will fall. Buying long-term US Treasuries when yields reach the upper fours (around 4.75-5%) offers a good entry point as a hedge and capital appreciation trade.
TLT MED
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This Monetary Matters video, published May 31, 2026, features Jim Masturzo discussing TIP, IEF, DBC, TLT. 4 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Jim Masturzo  · Tickers: TIP, IEF, DBC, TLT