'Something bad is coming': Aswath Damodaran is ditching diversification, eyeing hard assets
Damodaran, widely respected for his data-driven discipline, also revealed a rare personal pivot. “For the first time ever, I am looking at parking my money into one, cash, and two, collectibles or physical assets,” he said.
- Nov 16, 2025,
- Updated Nov 16, 2025 9:15 AM IST
There is a bubble in AI, no safe corner left in the stock market, and even Aswath Damodaran, Wall Street’s most trusted valuation expert, is now looking to gold, cash, and collectibles.
For the first time in his investing life, he is preparing for what he calls a potentially catastrophic market scenario.
In a recent podcast, the NYU Stern professor warned that asset classes have become so tightly correlated that traditional diversification no longer works.
“You almost have to struggle to find something that doesn't move with markets,” Damodaran said. “The classic rule of spreading your money across sectors and geographies doesn’t hold up anymore.” He pointed to passive investing and the dominance of index funds as core reasons for this breakdown in protection.
Damodaran, widely respected for his data-driven discipline, also revealed a rare personal pivot. “For the first time ever, I am looking at parking my money into one, cash, and two, collectibles or physical assets,” he said. That includes gold, a non-yielding asset he typically avoided. This time, he said, the shift is driven by fear, not fundamentals.
“The only way I can explain gold’s rise in a year when stocks are up 15 to 20 percent and interest rates are stable is this: there is a subset of the market saying, I do not believe these numbers. Something bad is coming.”
He urged traditional investors to reconsider their allocations. “Even if you have never invested in non-financial asset categories, this might be a time to move a bigger chunk than ever into cash or something close to cash.”
Looking ahead, Damodaran sees two painful scenarios: either a sharp correction of 30 to 35 percent or a long, grinding market that bleeds slowly over several years.
“Either way, you are hurt,” he said. “Long stretches of flat or down markets are incredibly difficult. They suck all the energy out of you.”
Whether it arrives as a crash or a slow decline, Damodaran believes this cycle will test every assumption. With stocks and bonds no longer offering safe refuge, he says investors need to start thinking very differently.
There is a bubble in AI, no safe corner left in the stock market, and even Aswath Damodaran, Wall Street’s most trusted valuation expert, is now looking to gold, cash, and collectibles.
For the first time in his investing life, he is preparing for what he calls a potentially catastrophic market scenario.
In a recent podcast, the NYU Stern professor warned that asset classes have become so tightly correlated that traditional diversification no longer works.
“You almost have to struggle to find something that doesn't move with markets,” Damodaran said. “The classic rule of spreading your money across sectors and geographies doesn’t hold up anymore.” He pointed to passive investing and the dominance of index funds as core reasons for this breakdown in protection.
Damodaran, widely respected for his data-driven discipline, also revealed a rare personal pivot. “For the first time ever, I am looking at parking my money into one, cash, and two, collectibles or physical assets,” he said. That includes gold, a non-yielding asset he typically avoided. This time, he said, the shift is driven by fear, not fundamentals.
“The only way I can explain gold’s rise in a year when stocks are up 15 to 20 percent and interest rates are stable is this: there is a subset of the market saying, I do not believe these numbers. Something bad is coming.”
He urged traditional investors to reconsider their allocations. “Even if you have never invested in non-financial asset categories, this might be a time to move a bigger chunk than ever into cash or something close to cash.”
Looking ahead, Damodaran sees two painful scenarios: either a sharp correction of 30 to 35 percent or a long, grinding market that bleeds slowly over several years.
“Either way, you are hurt,” he said. “Long stretches of flat or down markets are incredibly difficult. They suck all the energy out of you.”
Whether it arrives as a crash or a slow decline, Damodaran believes this cycle will test every assumption. With stocks and bonds no longer offering safe refuge, he says investors need to start thinking very differently.