US set for another dot-com-style crash, fund manager warns

The US stock market is headed for a crash which could see dismal returns for the next 10–15 years, a veteran fund manager told Business Insider this week.

One of Wall Street’s biggest bears, Bill Smead, Chief Investment Officer with Smead Capital Management, has warned that stocks appear to be in the midst of a speculative bubble, which could set investors up for a ‘dead ball’ era of performance.

The skepticism comes despite the S&P 500 rising sharply in recent months, even hitting new record highs in March, after a 24% surge in 2023. The index is up around 8% so far this year.

Smead believes the bear market wil last for a decade and will only end once all the enthusiasm for the market’s most expensive stocks has bled out. The process could lead to losses on par with the dot-com bubble and the Great Financial Crisis, he forecast. 

“It will be more like the ‘00-’03 bear market, or more like ‘07-’09,” Smead told Business Insider. “We’ll probably get two full-blown bear markets in a 10-year time period that will basically negate making any money in the S&P 500 index. You won’t want to buy the S&P 500 index until it becomes kind of a swear word,” the veteran fund manager warned.

He also pointed out that the losses could be fueled by stubbornly high inflation. The Bureau of Labor Statistics’ latest CPI report showed on Wednesday that the consumer price index has come in hotter-than-expected for the last three months, with prices rising 3.8% year-over-year in March.

That’s making the economic landscape look precariously similar to the 1970s, Smead cautioned, right before inflation spiraled out of control, hitting the stock market.