As the S&P 500  index and the Dow Jones Industrial Average (DJIA) both look at risk of losing a majority of their June gains at the open on Tuesday, one investor sees a correction as inevitable, even without trade war fears. Billionaire Jim Mellon, chairman of the Burnbrae group, told CNBC in an interview that investors should brace themselves for more selling action, rebalancing complacency that has plagued the market and working to deflate high-flying equities. (See also: Why US Growth Will Slow: Goldman Sachs.)

In regards to trade, Mellon indicated that he hopes President Donald Trump does not follow through on new threats, such as a potential 10% tariff on $200 billion more Chinese imports. "Obviously, trade war isn't good for anyone," said Mellon, "certainty not for U.S. consumers or the U.S. economy."

That being said, the Bunbrae chairman believes that there is an imbalance that needs to be addressed, as China exports five times more to the U.S. than the U.S. exports to China. However, Mellon views Trump's comments as "a little bit loud at the moment." While noise from the White House is certainty having an effect on the market, he views the more important takeaway as the market's quick reaction.

Sell-Off Shows Investors' Eagerness to Dump Expensive Equities

The investor indicated that the reason equities are falling so fast is because the market is already "far too expensive." Mellon noted that U.S. indexes are selling at 32 times the cyclically adjusted price to earnings (P/E) ratio, at an all-time high. Trade war or not, it's time for a major correction anyway, he said, viewing the current environment of trade war fears as offering an excuse for sellers who may have been looking to sell. 

Mellon criticized "far too much complacency" in the market, showing up in the form of record share buybacks from corporations, which has supported the market, as well as a concentration of ownership, particularly in high-flying tech stocks. 

Ultimately, Mellon does not see an all-out trade war materializing, telling CNBC that "globalization has been so good for everyone," particularly the U.S., and that Trump has to be aware of this in some way. (See also: Why Bridgewater Calls 2019 a 'Dangerous Year'.)

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