Stocks are expensive. Bonds are expensive. What is an investor to do? Unfortunately, the only answer appears to be to invest in new and unfamiliar assets, taking new and unfamiliar risks.

Both equities and bonds look expensive compared with their own history (dramatically so in the case of bonds). Put the two together and the plight of pension funds with fixed liabilities to meet appears impossible. Cliff Asness, a former academic who now runs AQR Capital Management in New York, says the prospective return over the next decade from a portfolio invested 60 per cent in US equities and 40 per cent in bonds is 2.4 per cent per year. This is the worst predicted return in 112 years.

An alternative forecast by Elroy Dimson, Paul Marsh and Mike Staunton, financial historians at the London Business School, points to the extreme low real interest rates and shows that these have been associated over history with low subsequent returns for both equities and stocks.