Brad McMillan: The stock market would have to drop as much as 30%-40% to be fairly valued, says advisor

Brad McMillan — who counsels independent financial advisors representing $114 billion in assets under management — told CNBC on Monday that the stock market is way overvalued.

"The market probably would have to drop somewhere between 30 and 40 percent to get to fair value, based on historical standards," said McMillan, chief investment officer at Massachusetts-based Commonwealth Financial Network.

The Dow Jones industrial average and the S&P 500 closed at record highs Friday. The Dow had its best week of the year. The Nasdaq hit a trading high during the session on Friday, but just missed ending at a record.

Part of McMillan's thesis is rooted in his belief that the lofty levels of the so-called FANG stocks — Facebook, Amazon, Netflix and Google-parent Alphabet — seem reminiscent of the dot-com bubble in the late 1990s.

With that mind, McMillan said: "Take as much risk as you want now. But you should be aware that at some point the market is going to pull back."

Source: Bloomberg Pro Terminal

Junior Trader Stefan Panteleev

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