Original title: professor of Wharton Business School said: us stocks are risky in the fourth quarter, be bullish on gold!
It may not be easy for U. S. stocks in the fourth quarter of this year. On Friday, Jeremy Siegel, a finance professor at Wharton who is known for his aggressive market forecasts, warned of the market's ability to cope with inflation. He believes that inflation will be a bigger problem than the Fed thinks, that rising prices pose serious risks, that the Fed will face pressure to accelerate the reduction of bond purchases, and he does not think the market is ready.
His caution is a far cry from his optimism at the beginning of January. On Trading Nation on Jan. 4, he correctly predicted that the Dow Jones industrial average would reach 35000 in 2021, up 14% from the start of the year. On Aug. 16, the index reached an all-time high of 35631.19. On Friday, the index closed at 34326.46.
He now believes that the biggest threat to Wall Street is that Federal Reserve Chairman Colin Powell withdrew from loose monetary policy earlier than expected because of a sharp rise in inflation.
"We all know that many of the volatility in the stock market is related to the liquidity provided by the Fed," he said. If the rate of reduction is faster, it also means that interest rates will be raised faster. Neither of these things is good for the stock market. "
Siegel is particularly concerned about the impact on growth stocks, especially technology stocks. He believes that NASDAQ, which is dominated by technology stocks,(Nasdaq), which is only 5% from its all-time high, is likely to fall sharply and the market will tilt towards value stocks.
He believes this background bodes well for companies that benefit from higher interest rates, have pricing power and pay dividends. Against an inflationary backdrop, underperforming utilities and consumer goods companies known for paying dividends are likely to rise strongly.
In addition, Siegel is also bullish on gold.
He believes that gold, as a hedge against inflation, has become relatively cheap, pointing to the popularity of bitcoin as a reason.
"the market turned to Bitcoin and I think they ignored gold," says Mr Siegel. I remember when inflation in the 1970s, everyone turned to gold. Now in our digital world, investors are turning to Bitcoin, and I think they ignore gold. "
Siegel was not intimidated by the rise in real estate prices. "I don't think it's a bubble," he said. Investors have foreseen inflation to some extent. I think mortgage rates will have to rise sharply to really hit the housing market. Therefore, I think real estate is still a good asset worth owning. "
