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

Core Viewpoint - U.S. markets are seen as a strong investment destination, but caution is advised due to high valuations and market optimism [2][3][4] Group 1: Market Sentiment - Investors are currently optimistic about U.S. stocks, influenced by potential Federal Reserve rate cuts and ongoing U.S.-China trade discussions [1] - The prevailing sentiment among U.S. investors is described as "happy, relatively carefree, and maybe complacent," leading to high prices relative to value [4] Group 2: Valuation Concerns - The S&P 500 is considered expensive, with a forward P/E ratio of 22.7, suggesting limited returns for new investors at this valuation [6] - Historical data indicates that buying the S&P 500 at a P/E of 23 could yield average returns between 2% to -2% over the next decade [5][6] Group 3: Sector Analysis - The "Magnificent Seven" tech stocks are viewed as superior investments due to their strong growth, solid products, and significant profitability, despite the overall market being expensive [7][8] - Concerns about a potential AI stock bubble exist, but it remains uncertain whether current equity prices for these companies are justified [8]