Stocks are ‘going nowhere’ for the next decade as inflation sticks around and US debt balloons, CIO says

• Investment vet Bill Smead said the stock market will see poor returns over the next 10 to 15 years.

• The head of IT at Smead Capital warned that inflation is likely to persist in the long term.

• This could lead to a situation similar to what happened in the 1970s, when rising prices led to a “dead zone” for stocks.

The stock market is headed toward a period of dismal returns for at least the next 10 years, according to one very pessimistic IT manager.

Bill Smead, chief investment officer at Smead Capital Management, has been warning of the path ahead for stocks for some time. He recently warned that this is because inflation will persist, hurting S&P 500 returns for years. letter For customers.

“We assume that the S&P 500 is not going anywhere for 10 to 15 years, and that the inflation zeitgeist is here to stay,” Smid said.

In an earlier note, Smid compared the current macro environment to the 1970s, when rising inflation and rising interest rates led to a “dead ball” period for stocks. A new inflationary era could produce a similar “dead zone,” he wrote. Double-digit stock losses On par with the dot-com bust and the Great Financial Crisis.

The inflation rate has slowed significantly after reaching its highest levels several years ago, thanks to the Federal Reserve's tightening monetary policy. Consumer prices rose 3.4% year over year in AprilBut market commentators note that this remains the case Well above the Fed's long-term inflation target of 2%.

Inflation could get worse in coming years, partly fueled by prices High levels of public debt, Samid said. The federal debt is about $34.5 trillion.

“We've been running huge fiscal deficits for years, and there are three ways to balance the budget. You can cut the budget, you can raise taxes, or you can inflate your way out by paying it with devalued US dollars,” Smid said, later adding. The first two options are unlikely due to political constraints.

Other forecasters have warned of a severe downside for stocks, especially since the United States still faces the risk of sliding into recession over the next year. Economists at the Federal Reserve Bank of New York have priced in There is a 50% chance of a recession occurring by April 2025According to their latest forecasts.

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