Professor of finance at the Wharton School Jeremy siegel said on Thursday that he expects the stock market rally to persist at least through this year. However, he told CNBC that investors will have to be careful once the Federal Reserve adjusts its very accommodative monetary policies.
“It’s only when the Fed is leaning really hard that you have to worry. I mean, we could push the market up 30% or 40% before going down 20%” following a change in course in the Fed, Siegel says on “Half-time report. “We’re not in round 9 here. We are more in round 3 of the boom.”
Siegel said he expected to see a booming economy this year as the latest Covid-era economic restrictions lifted and vaccinations allow travel and other activities to resume. This, however, risks triggering inflationary pressures, he said.
“I think interest rates and inflation are going to rise well above what the Fed has forecast. We’re going to have a strong inflationary year. I think 4% to 5%,” the bull said. long-standing market.
Economic conditions of this nature will force the central bank to act sooner than he currently foresees, Argued Siegel. “But in the meantime, enjoy this ride. It will continue… towards the end of the year.”
US stocks were higher around noon Thursday, with the NasdaqIt’s about 1% to put forward the real star. The high-tech index fell on Wednesday but remained around 2.9% from its record February close. the S&P 500 added to Wednesday’s record close. the Dow Jones Industrial Average was higher but still below Monday’s record close.
the 10-year Treasury yield, still below 1.7% on Thursday, has been fairly stable recently. The rapid surge in market rates in 2021, including a series of 14-month highs in late March, hit growth stocks, many of which are tech names, as rising costs of borrowing erodes the value of future earnings and tightens valuations.
The bond market has been at odds with the Fed this year, as traders push yields higher, convinced that stronger economic growth and inflation will force central bankers to move closer to short-term interest rates zero and reduce massive asset purchases earlier than expected.
At its March meeting, the Fed has stepped up its growth expectations sharply, but indicated the likelihood of not raising rates until 2023 despite an improving outlook and a shift this year towards higher inflation.