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Don't bet on the promise that's fueling the Trump stock rally, billionaire investor warns

While standing by his January prediction on CNBC for a 10 percent gain in the S&P 500 this year, billionaire Marc Lasry warned that the Trump rally could falter in 2018.

The stock market has been rising since Election Day on the hope that Donald Trump as president can boost economic growth to 3 percent and provide businesses relief from regulations, the Avenue Capital co-founder said Wednesday on "Squawk Box." "The market absolutely believes. I think the market has gotten ahead of itself."

"For the next six months to nine months, everything is pretty positive," said Lasry, who supported Hillary Clinton, reiterating his call for an S&P 500 return of 10 percent this year.

"I'd like nothing better than to have 3 percent GDP growth. I don't think that's going to happen," he warned, predicting economic growth settling around 1.5 to 2 percent. "If you don't get to that 3 percent, yes, then I think [the market] is a little over bought right now."

Going into 2018, he said, "People are going to start realizing there is real issues out there," putting the Trump rally in jeopardy.

In the near term, the stock market on Wednesday was coming off its worst decline since before the election. On Tuesday, the Dow Jones industrial average saw its biggest decline since September and the S&P 500 had its largest one-session sell-off since October.

"I think it is a time to pause because everybody's waiting to see is the health-care bill going to pass," Lasry said, a day before the scheduled vote before the full House of the Trump-backed bill to repeal and replace Obamacare.

If the GOP's health-care bill passes by a relatively decent margin, the rest of Trump's agenda, including tax cuts, can move forward, he said. "That's going to end up being very positive."

Avenue Capital, which specializes in investing in distressed debts, has about $10.7 billion in assets under management.

In addition to running Avenue Capital as chairman and CEO, Lasry owns a stake in the NBA's Milwaukee Bucks.

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