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‘Expensive, but not nutty.’ Howard Marks on U.S. stocks and the one thing investors should be doing right now.

1. Stocks rise amid optimism for Fed rate cuts and U.S.-China trade. 2. Howard Marks cautions U.S. market optimism may lead to high prices. 3. S&P 500's P/E ratio at 22.7 indicates potential overvaluation risks. 4. Tech stocks show strength, but broader market may face challenges. 5. Marks suggests increasing defensiveness in investment strategies.

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FAQ

Why Bearish?

The S&P appears overvalued according to its P/E ratio, which historically correlates with lower future returns. For instance, a P/E of 23 yielded 2% to negative returns historically.

How important is it?

Marks' warnings on overvaluation can influence investor behavior, particularly affecting large indices like the S&P 500 where caution could lead to selling pressure.

Why Short Term?

The presents concerns highlighted by Marks may manifest quickly as investors react to perceived overvaluation. Short-term fluctuations based on market sentiment often follow discussions of market valuation.

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