Is the nightmare of the Internet bubble repeating itself? Smead Capital warns: current US stock valuations have reached the "death line"

Asset management company Smead Capital Management's Chief Investment Officer Bill Smead has issued a warning, stating that the current valuation of US stocks has reached a "death line," a dangerous level that last appeared during the peak of the internet bubble. In an interview, Smead pointed out that the inflation-adjusted price-earnings ratio has reached the levels of the internet bubble era. Currently, the top ten mega-cap companies - NVIDIA Corporation (NVDA.US), Microsoft Corporation (MSFT.US), Apple Inc. (AAPL.US), Amazon.com, Inc. (AMZN.US), Alphabet Inc. Class C (GOOGL.US), Meta (META.US), Broadcom Inc. (AVGO.US), Tesla, Inc. (TSLA.US), Berkshire Hathaway (BRK.A.US), and JPMorgan Chase (JPM.US) - are valued even more expensively than during the bubble peak. Smead specifically pointed out that the residential construction sector is attractive for investment in the current market environment. He explained, "The best time to invest in residential construction stocks is during times of industry pessimism, which is the case now; it is better to sell when market sentiment is high." He further analyzed that potential tariff reductions may alleviate cost pressures for residential construction companies and could impact mortgage interest rates. Smead emphasized that the current market valuation is more about indicating which assets to avoid rather than predicting returns in the next 3-6 months. For large-cap stocks and index funds like the S&P 500 components, "such data can better predict returns over the next 3 years, 5 years, or even 10 years, and these returns may not meet investors' expected returns."