Decade ahead will be great for investing but we’ll need to wait 12 months first, CIO says

Investors will need to wait out the next year to reap the financial rewards of the next decade, according to Bill Smead, chief investment officer at Smead Capital Management.

“We know we have to sit through the next probably 12 months of probably the tide continuing to go out and going against us temporarily to get to the money we’re going to make over the next 10 years,” Smead said on CNBC’s “Squawk Box Europe” Wednesday.

Smead said capital and labor-intensive businesses were winners as the value of their income streams for the next decade “is way more viable than those stocks are representing.”

Smead Capital Management has oil and gas, land and Canadian lumber producers under its belt, which should all be bolstered thanks to the current property market in the U.S., Smead said.

“We know that we’ve got to build a lot of houses in the next 10 years,” he said.

The U.S. housing market boomed at the height of the Covid-19 pandemic as people looked to relocate and interest rates reached a record low, but it has since cooled as recession concerns weigh on the minds of prospective buyers and sellers.

History repeating itself?

Smead also drew parallels between the current economic situation in the U.S. and the 1960s and 1970s.

“Back then you had the Vietnam War, now you’ve got the pandemic war,” he told CNBC, adding that both periods involved a large amount of government borrowing relative to GDP.

Smead isn’t the first analyst to suggest a look back into history could indicate what’s ahead for the economy.

Historian Niall Ferguson suggested the world was sleepwalking into an era of political upheaval similar to the 1970s, but worse, when interviewed by CNBC at the Ambrosetti Forum in Italy in September.

“The ingredients of the 1970s are already in place,” Ferguson, Milbank Family Senior Fellow at the Hoover Institution, Stanford University, said.

Nobel Prize-winning economist Christopher Pissarides made similar comparisons in June when he described the labor market as “worse than the 1970s,” with workers across Europe opting to strike over pay and working conditions.

An increasing number of workers have decided to strike since Pissarides made the comments in the summer.