Investment legend Seth Klarman went back to his roots at the Harvard Business School to declare that the stock market is still too pricey even with its slide this year. “You’ve got a stock market that’s one of the most expensive ever,” said the chief executive of the value-focused Baupost Group, in an interview posted on Friday. The S&P 500
SPX,
+0.22%
is now down 23% for the year.
He said there are cross-currents hitting the market right now, firstly identifying the rise in interest rates. “Interest rates are starting to move higher, and they should move higher, because they’re been held artificially low for a really long time,” he told Das Narayandas, a professor at the Harvard Business School. “I think it’s going to jolt some people, and even the system, when they start to move higher.” “It’s been a 35-year bond bull market, so that’s going to be a big shock that is going to test I think financial institutions who’ve been hedged, who’s been writing derivatives they shouldn’t write, who’s been stepping out to take greater risks in their portfolio, because if you can’t make it in bonds, people try to make it somewhere else.” Inflation, he adds, is a challenge because investors don’t like to get guaranteed losses from their safe portfolio. The war in Ukraine — “clearly a war of aggression” — is another issue. Klarman also identified another risk. “I’m also worried about the great divides in American s …