Arkansas News Bureau

LITTLE ROCK — The stock market could face “headwinds” for the rest of the year, Little Rock financier Warren Stephens said Friday.

Appearing on CNBC, Stephens also said business cost-cutting may have run its course.

The CEO of Stephens Inc. said he was a bit surprised by the way the stock market has rebounded in the wake of last year’s financial meltdown.

After peaking at 14,165 in October 2007, the Dow Jones bottomed out at 6,547 in March this year before rebounding to roughly 500 points shy of 10,000 as of Thursday.

But Stephens said Friday he sees turbulence ahead.

“I think the market is going to face some headwinds for the rest of the year,” he said. “You can only cut costs so much and businesses have made their numbers by cutting costs, but at some point you’re just not able to do it, and a lot of businesses are there.”

Responding to a question, Stephens acknowledged a chance the stock market could suffer another large drop, which would eliminate the recent gains. He also raised the prospect for future inflation.

“In the intermediate to long run, with our stimulus and federal deficits, there’s very strong likelihood, it seems to us, that inflation picks up,” he said. “That’s certainly somewhere down the road, but it looks like to us it’s inevitable.”

He predicted more layoffs ahead and said it would be “a while, I think, before we see some top-line growth in a lot of our clients’ business and in the business that we’re an investor in.”

As for consumers, Stephens said they are “under a lot of pressure to repair their balance sheets; they’re not in the mood to spend very much.”

“With unemployment the way it is and the underemployment, if you will, with people having furloughs, I think the consumer is in a pretty rough spot,” he said.

Stephens is an owner of Stephens Media, which has about 40 newspapers in eight states.