Stock Market Decline to Continue, Warns Investment Veteran Bill Smead
Bill Smead, founder of Smead Capital Management, has issued a stark warning about the continued decline of the stock market. His prediction aligns with recent drops in the S&P 500 and Nasdaq 100, which he attributes to a lack of economic stimulus from both the Federal Reserve and Congress.
Smead argues that stocks have become the primary source of liquidity as other avenues retract. With the Federal Reserve unlikely to cut rates and government spending reduced, selling stocks has emerged as the main liquidity source in the current economic climate.
The impact of this decline could be far-reaching, affecting consumer spending and overall economic health. Wealthy consumers, who are key drivers of spending and account for two-thirds of GDP, are particularly vulnerable to stock market fluctuations. Baby boomers’ spending power, closely tied to stock performance, may also be compromised.
Adding to market uncertainty are tariffs imposed by President Trump, which have increased business uncertainty and affected consumer sentiment. The technology sector is also facing re-evaluation amid advancements in AI and related investments.
Despite these challenges, Smead remains confident in his investment strategy. While the Smead Value Fund has recently underperformed, down 8.5% compared to the S&P 500’s 9.3% rise, its long-term track record remains strong. The fund has outperformed 96% of similar funds over 15 years.
Addressing client concerns, Smead reassures investors about recent underperformance, citing past recoveries and highlighting the fund’s history of contrarian investing and resilience during market fluctuations. The fund’s largest exposures are in financials, consumer cyclical stocks, and energy sectors, with top holdings including Simon Property Group, American Express, and Macerich.
As market uncertainty persists, investors will be closely watching how Smead’s predictions and investment strategies play out in the coming months.
