Investor Bill Smead warns of a potential reversal in the stock-market rally, citing resistance trend lines and Warren Buffett’s cautious cash position as signs of trouble. Smead’s Smead Value Fund has outperformed peers over the last 15 years, with the market hitting resistance levels that historically lead to corrections.

Smead believes the market is in a vulnerable spot, with potential for disaster in the decade ahead as economic fundamentals remain solid. He emphasizes the frothy nature of the current environment and warns of poor returns for the S&P 500. Smead expects a shift towards value outperformance, benefiting his fund heavily concentrated in energy, consumer cyclical, and financial sectors.

Warren Buffett’s cautious approach, holding record cash positions, also raises concerns for Smead, referencing Buffett’s history of conservative portfolio management leading up to past market crashes. Buffett’s performance suffered initially, but he later outperformed the S&P 500 when the market crashed.

Read more at Yahoo Finance: Stocks just hit a ‘line of death’ last reached at the peak of the dot-com bubble, veteran investor Bill Smead warns