High Stock Valuations Push Advisors Toward Private Markets
Public markets have rewarded investors handsomely over the past 15 years. Strong earnings, dominant technology companies and abundant liquidity helped drive stocks steadily higher.
That run has also pushed valuations to historically demanding levels. U.S. stocks are now more expensive relative to the economy than they were during the dot-com bubble or the 2021 market peak. Based on Federal Reserve data, Ascentis Asset Management estimates that U.S. corporate equities are worth about 230% of GDP and sit 2.6 standard deviations above their long-term trend.
For advisors, that raises a tougher question: How much of the next decade’s growth is already reflected in current prices?
What High Starting Valuations Have Meant
Valuations this high have historically occurred around major market peaks. Using Robert Shiller’s historical market data, our analysis shows that investors who bought during periods of exceptionally high valuations often earned little or no inflation-adjusted return over the following decade.
In many cases, the businesses themselves continued to grow and produce strong earnings. The issue was that investors had simply paid so much for that growth that solid operating results were not enough to generate attractive long-term returns.
That risk still exists today. Stocks might keep climbing if company profits stay strong, but high prices mean there is less margin for error. If earnings drop, rates stay high or the economy shifts faster than expected, today’s prices could be tough to maintain.
Against this backdrop, advisors are now struggling to determine how much they can continue to rely on public equities to carry client portfolios. With so much future growth already reflected in current prices, other sources of income, appreciation and diversification are becoming more important.
Private Markets Are Taking on a Larger Role
Asset managers have expanded the number of vehicles designed to bring private investments to individual investors. Preqin reports that the number of evergreen private credit funds more than doubled between 2020 and July 2025, while McKinsey estimates that evergreen and semiliquid vehicles in the U.S. wealth channel reached $348 billion in assets in 2024.
These vehicles have expanded access to private credit, private equity, infrastructure and real assets. As a result, advisors now have more ways to incorporate private investments into client portfolios without relying solely on traditional drawdown funds or institutional structures.
This trend has also come with more scrutiny of fees, transparency, valuation and liquidity. The redemption pressure several funds faced this spring showed why liquidity matters: When investors want their money back, funds that hold private loans, companies and real assets cannot always sell those investments quickly without accepting unfavorable prices. Private assets, therefore, work best for anyone who can put the money away and not touch it for years.
But for clients who can make that longer-term commitment, private markets offer access to distinctive investment opportunities that can create value beyond what public markets alone can provide. That gives advisors a strategy for diversifying portfolios and reducing their dependence on a relatively small group of companies.
The Next Cycle Will Require More Private Capital
The trends shaping the next decade will likely expand this opportunity even further. As global supply chains become more fragmented, governments and businesses are investing more heavily in domestic manufacturing, defense, energy, data centers and infrastructure.
Artificial intelligence will add another layer of demand, requiring sustained investment in semiconductors, computing power, energy and physical facilities. At the same time, tariffs, labor shortages, government deficits and less efficient trade could keep inflation higher than it was during the 2010s.
In an environment like that, monetary policy may provide less support for asset prices, while trade, tax, industrial and energy policies play a greater role in determining where capital flows.
Together, these shifts will influence financing costs, discount rates, valuation multiples and the sectors best positioned to generate returns. They are also likely to channel more capital toward private companies, middle-market borrowers and privately funded projects.
To be sure, public stocks will still be a key part of most portfolios. They provide liquidity, transparency and access to top global companies. However, advisors should be careful about expecting the next 15 years to play out like the last 15.
That’s why private markets may need to do more work than they have in the past. With public valuations this stretched, they can provide access to return streams and areas of capital formation that are not fully captured by traditional stock and bond allocations.
