The Master Investor Podcast with Wilfred Frost

Aswath Damodaran: I Am More Cautious Than Ever

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Feb 25, 2026

Aswath Damodaran, NYU Stern finance professor and valuation expert, explains why he is unusually cautious about equities and holding more cash. He questions AI hype and massive CapEx, warns of eroding trust in institutions, and defends buybacks and valuation-first investing. He also shares his favorite mega-cap picks and the value of idling to think.

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INSIGHT

Implied Market Return Reveals What Stocks Are Priced To Deliver

The market-implied expected return can be computed from index level, expected dividends and buybacks to show what investors collectively are pricing.
Damodaran's monthly implied S&P 500 expected return was about 8.4% in early February, framing asset-allocation choices.

INSIGHT

Buybacks Are Flexible Dividends And Count As Cash Returns

Buybacks function as flexible dividends and should be treated as cash returns to shareholders alongside dividends in valuation.
Damodaran argues buybacks have shifted capital allocation and have done more good than bad for US markets over decades.

INSIGHT

Private Credit Growth Invites Underwriting Risks

Private credit is not the same as banking but its rapid growth to trillions risks sloppy underwriting and a painful cleanup.
Damodaran is skeptical of claims private credit uniquely assesses default risk or solely fills unmet borrowing needs.

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Aswath Damodaran, Professor of Finance at NYU Stern School of Business, joins Wilf to reveal that he is more cautious of the equity market today than at any point in his career.

Because of this he has “more cash in my portfolio now than at any time in history”, and says this is a time to harvest profits gained in recent years as opposed to sowing more crops. He has recently sold his position in Nvidia accordingly.

Aswath shares his core reason for market concern, including the erosion of trust in economic institutions, and the move from a post WWII economic world order to an as yet unknown future, which he argues the market is too relaxed about.

He is sceptical of both the companies making AI who have overspent on CapEx, AND the companies due to use AI, arguing that rather than deliver greater efficiencies they will erode profitability – “if everybody has it, nobody has it”.

However – he does not believe in trying to time the market, and he reveals his cash balance is 15% not 50%, and that he still holds 5 of the Magnificent 7, his favourites being Apple, Amazon and Alphabet.

Aswath shares many of his core investing principles including how you know when to sell a stock as well as when to buy it; why buybacks have done more good than bad; why we should listen to what the gold surge is telling us even if gold cannot be valued, only priced; and why you must view investing as a way to preserve and growth wealth not to get rich.

There is also some life advice too - the importance of idling, and finding space to dream.

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