The market is a bad inflation report far from correction: Jeremy Siegel

Jeremy Siegel, who has been bullish for a long time in the market, expects a serious correction unrelated to the risk of a surge in Covid-19.

His tipping point: the sharp changes in Fed policy in response to hot inflation.

“If the Fed suddenly becomes tougher, I’m not sure if the market will be ready to turn around [chair] If we have another bad inflation report, Jerome Powell may accept it,” the Wharton Finance Professor told CNBC.”Trading country“Friday. “The correction will come.”

The consumer price index rose 6.2% in October, The Labor Department reported earlier this month. This is the biggest increase in more than 30 years.

Siegel criticized the Fed for lagging far behind the curve in taking anti-inflation actions.

“In general, because the Fed has not taken any aggressive measures at all, funds are still flowing into the market,” Siegel said. “The Fed is still doing quantitative easing.”

He speculated that the critical moment will occur at the Fed’s policy meeting on December 14-15.

Siegel warned that if this indicates a more aggressive approach to curbing price increases Correction may happen.

‘No substitution’

Despite his concerns, Siegel still holds stocks.

“I’m still very involved, because, you know, there is no choice,” he said. “In my opinion, bonds are getting worse and worse. Cash is disappearing at an inflation rate of over 6%, and I think it will be even higher. “

Siegel expects that price increases will continue for several years and the cumulative inflation rate will reach 20% to 25%.

CNBC Pro’s stock selection and investment trends:

“Even if the stocks are a bit bumpy, in this case you must want to hold physical assets. Moreover, stocks are physical assets,” he pointed out. “In the long run, everything that will maintain value.”

But it depends on the company.

He noticed Inflation background will produce headwinds For the tech expert Nasdaq, Hit a record high, and broke 16,000 points for the first time on Friday.

“If interest rates rise, high-priced stocks with discounted cash flows will flow into the future… [are] Will be affected by the discount mechanism,” he added.

Siegel attributes the record strength of growth stocks to concerns and declines in Delta variants Treasury bond yieldHe predicted that as more and more people get boosters, the surge in Covid-19 will subside.

“This has prevented the so-called reopening of trade,” he said. “value It becomes very cheap. “

If Siegel is correct about the sudden change in Fed policy, he believes Wall Street overcomes the shock It quite quickly and the new desire to own dividend stocks and finance In 2022.

“[Financials] They have been selling at lower interest rates recently,” Siegel said. “They may come back.

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