Billionaire Bill Gates told CNBC on Tuesday he sees the stock market as "expensive."
The Dow Jones industrial average is nearing the 20,000 level, swept up in the powerful rally since Donald Trump was elected president last month.
"Certainly stocks are expensive," the Microsoft co-founder said on "Squawk Box." He said he's amazed that interest rates have "stayed so low, for so long."
"When do we go back to normal in terms of interest rates [and] multiples, there would be a lot of adjustment there," Gates predicted. "Stocks are higher because of the interest rate environment."
Federal Reserve policymakers are expected to announce an interest rate increase on Wednesday, only the second in a decade. The last hike was in December 2015.
A gradual Fed rate increase path is generally priced in the market, said Gates, adding he would expect stocks to sell-off if "the Fed starts raising interest rates in a way that people are not expecting."
Looking at specific areas of investment, Gates said he's exposed to Mexico.
"We happen to own some companies down in Mexico," he said. "Right now, the peso has been very weak. So it will be interesting to see as the U.S.-Mexico relations get developed under this [Trump] administration is that oversold?"
Trump has called for building a wall along the U.S.-Mexican border to better control immigration.