{"id":77079,"date":"2025-07-20T04:10:11","date_gmt":"2025-07-20T04:10:11","guid":{"rendered":"https:\/\/www.europesays.com\/us\/77079\/"},"modified":"2025-07-20T04:10:11","modified_gmt":"2025-07-20T04:10:11","slug":"stocks-hit-a-line-of-death-last-reached-in-dot-com-bubble-investor-says","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/77079\/","title":{"rendered":"Stocks Hit a ‘Line of Death’ Last Reached in Dot-Com Bubble, Investor Says"},"content":{"rendered":"

Bill Smead<\/a> doesn’t know how long the current stock-market rally can continue, but the veteran investor does think it’s in a particularly vulnerable spot. <\/p>\n

In his Q2 letter to investors on July 15, Smead \u2014 whose Smead Value Fund (SMVLX<\/a>) has beaten 96% of peers over the last 15 years, Morningstar data shows \u2014 shared a chart displaying inflation-adjusted S&P 500 returns since the 1960s. <\/p>\n

An upward trend line shows resistance at two major market peaks, in 1966 and in 2000,\u00a0is also shown. In both of those instances when S&P 500 inflation-adjusted returns hit the trend line, a significant correction followed.<\/p>\n

In recent weeks, the market has touched the line for the third time since 1960 as the S&P 500 has surged to all-time highs around 6,300.<\/p>\n

\"s&P<\/p>\n

Smead Capital Management<\/p>\n

There’s no rule that says the market’s rally can’t break higher, especially if economic fundamentals, like inflation, consumer spending, and the unemployment rate, remain solid. But to be sure, it’s a foreboding reminder about how frothy the current environment is, and Smead thinks the market is set up for disaster where the S&P 500 delivers exceptionally poor returns over the decade ahead.<\/p>\n

“That doesn’t tell you when, but it does tell you a lot about the magnitude and the duration of what’s going to happen,” Smead told Business Insider.<\/p>\n

“You can’t hold your breath until it breaks,” he continued. “It’s not a question of whether, it’s a question of when.”<\/p>\n

Related stories<\/p>\n

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Business Insider tells the innovative stories you want to know<\/p>\n

The market’s impressive returns recently have been driven by growth stocks, particularly the Magnificent Seven mega-cap tech companies. So it’s not necessarily surprising that Smead, a value investor, is bearish on growth stocks’ prospects. <\/p>\n

A shift toward value outperformance would benefit Smead’s fund, which is down 10.6% over the last 12 months. The Smead Value Fund’s holdings are most heavily concentrated in the energy, consumer cyclical, and financials sectors.<\/p>\n

Still, Smead’s impressive long-term track record shows he could be onto something. Other popular measures of investor euphoria also show the market is at historically rich levels. For example, the Shiller cyclically-adjusted price-to-earnings ratio is near all-time highs.<\/p>\n

\"s&p<\/p>\n

GuruFocus<\/p>\n

Smead also cited Warren Buffett’s seemingly cautious approach in recent years, holding a record cash position, as a warning sign that things could go awry in the market. Buffett warned of froth in the market leading up to the dot-com bubble<\/a>, leading him to take a more conservative stance in his portfolio. As a result, his performance suffered in the year leading up to the bubble’s peak, but Buffett later smashed the S&P 500’s returns when the market crashed over the course of a few years.<\/p>\n

\"berkshire<\/p>\n

Smead Capital Management<\/p>\n

“Everybody wants to know why Warren Buffett holds so much cash,” Smead said. “It’s because he knows that at some point here this thing is going to get slaughtered.”<\/p>\n","protected":false},"excerpt":{"rendered":"Bill Smead doesn’t know how long the current stock-market rally can continue, but the veteran investor does think…\n","protected":false},"author":3,"featured_media":77080,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[64,135,67,132,68],"class_list":{"0":"post-77079","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-business","9":"tag-markets","10":"tag-united-states","11":"tag-unitedstates","12":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/114883606948854660","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/77079","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=77079"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/77079\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/77080"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=77079"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=77079"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=77079"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}