The S&P 500 will surf a tidal wave of government spending – but other parts of the US economy are in pain, Kevin O'Leary says

• Kevin O'Leary expects the S&P 500 to ride high as major federal spending programs kick in.
• The "Shark Tank" investor sees the CHIPS Act and Inflation Reduction Act boosting the stock market.

The S&P 500 will surf a wave of government spending over the next few years, while other parts of the US economy navigate a raft of challenges, Kevin O'Leary has said.

The "Shark Tank" investor expects the CHIPS and Science Act and Inflation Reduction Act to flood the US economy with cash and drive up stock prices, he told Fox Business on Monday.

The first program will invest $280 billion in domestic semiconductor production and various science and technology initiatives. Meanwhile, the IRA is set to deliver $500 billion in spending and tax breaks to support clean energy and bring down healthcare costs.

"That's money we're going to be printing, and where's it going? All into the S&P 500," O'Leary said.

"So if you're an S&P 500 company, yippee-ya-yoo-ka-yey," he continued. "You've got clear sailing for the next three to four years, and the market knows that."

The O'Leary Funds chief — whose nickname is "Mr Wonderful" — touted the benchmark stock index's appeal, even after its 17% rally this year.

"You want to own the S&P while this much dry powder's waiting," he said.

However, O'Leary underlined the stark contrast between the booming stock market, and the likes of regional banks and small businesses where "the cracks are starting to show."

He predicted the Federal Reserve would keep raising interest rates, driving the cost of car loans and other debts even higher. He also highlighted stubborn increases in food and energy prices, and poorer access to credit as many smaller banks have pulled back on lending since Silicon Valley's Bank collapse this spring.

Moreover, O'Leary argued that Fitch's shock cut to America's credit rating is worrying, even if Jamie Dimon and Warren Buffett shrugged it off last week.

"They can't be feeling great about a downgrade," he said, noting both executives are hugely reliant on US government debt. Indeed, Buffett's Berkshire Hathaway held $97 billion of US Treasury bills at the end of June.