CNBC reports that Wharton finance professor Jeremy Siegel, who’s known for his positive market forecasts, is sounding the alarm on the market’s ability to cope with inflation.
Siegel warns there are serious risks tied to rising prices. “There’s going to be pressure on the Fed to accelerate its taper process,’” he said. “I do not believe that the market is prepared for an accelerated taper.”
According to Siegel, the biggest threat facing Wall Street is Federal Reserve chair Jerome Powell stepping away from easy money policies much sooner than expected due to surging inflation.
“We all know that a lot of the levity of the equity market is related to the liquidity that the Fed has provided. If that’s going to be taken away faster, that also means that interest rate hikes are going to occur sooner,” he noted. “Both those things are not positives for the equity market.”
Siegel is particularly concerned about the impact on growth stocks, particularly technology. He suggests the tech-heavy Nasdaq, which is 5% away from its record high, is set up for sharp losses.
“There will be a challenge for the long duration stocks,” said Siegel. “The tilt will be towards the value stocks.”
He sees the backdrop boding well for companies benefiting from rising rates, have pricing power and deliver dividends.
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