Beware of bonds, says AllianceBernstein CIO

AllianceBernstein’s chief investment officer warned today that investors must be prepared for lower returns in equities and bonds in the coming years. In fact, Ranji Nagaswami, a senior managing director and chief investment officer for AllianceBernstein Investments, the retail division of New York-based AllianceBernstein LP, urged investors use extreme caution in purchasing bonds right now. Ms. Nagaswami spoke to advisers today at the Morningstar conference in Chicago. “We must be very careful to manage our clients’ expectations,” she said. “If we are to rely on history, we’ll be disappointed.” She said that even though some global capital markets have overpriced assets, investors still need to contain a healthy amount of global investments. In the past, investors used to thrive on investing in particular countries, but that has changed, and now investors must scrutinize companies closely investing in the best companies in all countries, Ms. Nagaswami said. She said the markets today are quite different from the past in that the The U.S. economy used to experience tremendous swings of volatility from defense spending, inventories and residential investments. Now, those volatile factors have greatly been reduced, she said. Another new development, she said is that growth stocks are now quite inexpensive compared to value stocks, a phenomenon that rarely occurs. “The so-called expensive growth stocks are less expensive then value stocks,” she said.