Smead also highlights the overvaluation of tech stocks, with the Nasdaq 100 being the most expensive compared to the Russell 2000 since the dot-com bubble. He suggests that the most expensive stocks are caught in a bubble and are due for a reversal in the coming years. Despite this, Smead sees opportunities in "out of favor" stocks such as oil, gas, bank, and homebuilder stocks. His views contrast with other Wall Street strategists who predict another positive year for the stock market.
Key takeaways:
- Investing veteran Bill Smead warns of a "speculative orgy" in the stock market that's about to fall apart, with overhyped AI stocks potentially crashing by 70%.
- Smead predicts that the S&P 500 will fail to generate any meaningful returns in the next 10 years as the market adjusts to the collapse of overvalued stocks.
- He identifies the "Magnificent Seven" mega-cap tech firms as being in a bubble, having accounted for nearly all of the S&P 500's gains this year, while the other 493 stocks have stayed mostly flat.
- Despite his warnings, Smead sees opportunities in "out of favor" stocks, particularly in oil, gas, bank, and homebuilder sectors.