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If someone believed that the US stock market is 40% overvalued compared to its long term average valuation, then would it be prudent to sell most of your US stocks, and wait for a better entry point?

No. Hedging would be prudent. Buy some insurance (index or SPY puts) or sell covered calls for income.
What will you do if you sell all stocks now and the market keeps going up and keeps getting overvalued? When would you jump in?
Jim doesn't have a crystal ball. Even if he is right, the market could stay irrational longer. Trends go a lot longer than most value investors expect them to. Look at gold. Look at treasuries (though that's thanks mostly to Helicopter Ben, there are other fools still buying 10-years at 1.65%).
Today has some parallels to post-World War II era when the Fed kept rates artificially low. How artificial could become clear next year if current year's drought pushes food prices higher and causes inflation. Stocks did well in 60s and they will do well in the 10s.
I will concede that if you HAVE to sell stocks then now may be the time to do it, rather than wait for the market to go even higher. But if you don't have to, then why jump in and out? Sit on your seat (to paraphrase Munger.)
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