Siegel Says Inflation May Hit 20% - but Still Sees Stocks Rising

The 'money supply is up almost 30% since the beginning of the pandemic,' Prof. Jeremy Siegel told a news service. 'That money won’t disappear.' It’s flowing into stocks.
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Jeremy Siegel, the renowned finance professor at the University of Pennsylvania’s Wharton School, is generally bullish on stocks, and now is no exception.

He told CNBC that the Federal Reserve has gone way overboard on easing, and that inflation could hit 20% within the next two to three years as a result. 

But until the Fed clamps down in response, stocks have plenty of room to roam to the upside, he maintains.

“Money supply is up almost 30% since the beginning of the pandemic,” Siegel said. “That money won’t disappear.” And it’s flowing into stocks, he said.

“You don’t want to go into bonds or cash,” he said. “Treasurys have negative real returns. That’s not very attractive.”

The S&P 500 recently traded at 4,167, up 1.34%. It has jumped 48% over the past year amid the economy’s recovery from pandemic-induced shock.

It’s all about stocks, and inflation won’t hold them down, Siegel told the news service.

“The history is that stocks more than compensate for inflation and there’s a lot of dividend-paying stocks — 2%, 3%, 4%, 5%,” he noted.

“So why would you go fixed income? The gap is huge. And that’s what I think is going to continue to drive the money into the market, despite the fears -- that will be realized -- that the Fed will tighten in the future.”

Friday’s gain came as investors’ inflation fears eased a bit.

TheStreet.com Founder Jim Cramer said Thursday that it’s time to consider increasing your cash position with inflation running hot.