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US stock valuations are “undeniably high” but can continue to “grind higher” if sales growth accelerates alongside a broader economic advance, Jeffrey Gundlach, the influential bond investor, said on Tuesday.

The chief executive of asset manager DoubleLine, who last year warned of possible volatile swings in the S&P 500 after Donald Trump won the US election, added his name to a growing list of investors who believe US stocks are richly valued.

Measures of price to earnings ratios, including the popular cyclically adjusted PE ratio created by Yale University professor Robert Shiller, have climbed to levels last seen in the late-1990s internet boom.

“Here is what’s alarming, the price to sales ratio of the S&P 500 has only been higher during the dot-com bubble,” he said. “Based on this you shouldn’t expect a 5 per cent gain in the S&P 500 unless sales meaningfully pick up.”

Mr Gundlach also nodded to the divergence between so-called hard and soft data, a point of consternation for economists and investors waiting for an increase in consumer and business sentiment to translate to faster economic activity.

“The reflation narrative may be fading in the months ahead,” he added, pointing to forecasts for headline inflation to peak in March before receding over the remainder of the year.

“You wonder what the Fed will do once the inflation rate goes back below their target of 2 per cent. We think that will happen in a few months,” he said.

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