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Market is unprepared for inflation fallout: Wharton’s Jeremy Siegel


Wall Street could be facing an unusually difficult quarter.

Jeremy Siegel from Wharton, a Wharton finance prof, has raised the alarm about inflation.

He said that “we’re heading for trouble ahead”, to CNBC’sTrading NationOn Friday, ” The Fed thinks inflation will be more of a problem in the long-term than it is now.

Siegel cautions that rising prices pose serious dangers.

“There will be pressure for the Fed to speed up its taper process,” he stated. “I doubt that the market will be ready to taper at an accelerated pace.”

He has now shifted to a more cautious stance, a marked departure from his early January bullishness. On Jan. 4 on “Trading Nation,He correctly foresaw the outcome. DowIt would be 35,000 by 2021. That’s 14% more than the initial market opening in that year. It reached an all time high of 35.631.19 on August 16. It closed Friday at 34,326.46.

Siegel believes that Wall Street faces the most serious threat from Jerome Powell (Federal Reserve chairman), who is expected to resign sooner than anticipated because of rising inflation.

The Fed’s liquidity is what gives the equity markets their levity. We know this. “If that is being taken away quicker, it will also mean that interest rates rises will happen sooner,” he stated. These are both negatives for equity markets.

Siegel is especially concerned about the effect on growth stocks. technology He advises tech-heavy NasdaqSharp losses are possible, as 5% is still far from the record.

Siegel said, “There will always be challenges for the long-term stocks.” “The trend will be in favor of value stocks.”

The backdrop is favorable for businesses that benefit from rising rates and have price power, and can pay dividends.

Yield is rare and you don’t want to lock yourself into to long-term government bondsHe stated that the following six months would see them suffer “very dramatically.”

According to Siegel, the inflationary background may cause underperformers utilities consumer staplesFor a strong run, consider, which is well-known for its dividends.

Siegel said, “They might finally have their day in sun.” Dividends allow firms to increase their prices. Inflation protection has been a feature of dividends in the past. These are not as stable as government bonds. However, they offer inflation protection and yield.

Siegel is bullish on goldIt is also available. As an inflation hedge, he believes that it is relatively affordable and has cited bitcoinPopularity is a key reason.

“They are turning to Bitcoin, but I believe they’re ignoring gold.”