Loving the pacing with which we start Our 2022 show with jeremy siegel now Joining us a professor of finance at the Wharton school of university for Pennsylvania give us your sense jeremy As a man who really does seem to be Someone who believes in equity markets Continuing to rally how much further how Much faster can they go Well I think they're going to uh confront Some bumps going forward because i think Inflation uh as you know i've i've been A hawk on inflation saying it's going to Be much worse than what the fed has said And i think there's going to be a lot More rate hikes Than is now predicted i would not be Surprised to see the short-term interest Rate go to two percent Uh by in so the stock market has to Confront that but That old saying that we all know tina There is no alternative in an Inflationary environment you want real Assets stocks are real assets Bonds i mean look at bonds today i think A lot of people are looking back and Saying Why do i want to hold dollars when Inflation is seven seven eight percent And uh i i see the stock market doing Well in the first half Bumps coming toward the middle
Still an up year But not as much as 2021. so professor if We do see a real spike on the short end Of the curve here and you have folks Start to question some of the valuations In the stock market at least on a a real Basis you know factoring in inflation Factoring in that rise in rates here Does that sort of pretend That maybe additional gains at least at The same scale that we saw in 2021 may Not necessarily be in store this year Yeah yeah perfectly and especially Uh As we know for those so-called High-flying tech stocks that are selling At multiples of revenues that don't have Earnings because if rates are going up You're discounting the future and those Discount rates goes down a lot Now last year growth still did beat Value stocks by a few percentage point i Think the tables are going to be turned This year i think people are going to be Searching for those dividend-paying Stocks Don't forget dividends on stocks are Basically real yields they're inflation Protected because they're based on real Assets uh you can't find anything in the Bond market i that i see attractive Okay on that note when does it become Attractive you talked about hitting the Two percent on the front end of the
Market What yield is attractive enough where You don't have tina in the stock market Well i think right now We're selling around 21 Times this year's earnings 22 above the Historical average but still not That expensive certainly with the Interest rate levels as they as they are Uh if you take out uh The tech or the fang stocks you're Selling in 18 times earnings i still Think i still think it's a reasonable Stock market and i think that people Even though they're not going to like Those higher rates are saying well Where am i going to go I mean they can go to real estate which I think is still going to do well this Year they're going to go to real assets What's going to do go Well this year some commodities well This year what won't do well this year Is those assets that are only Denominated in dollars To that end talk to us about the dollar Because the dollar just pushes up i mean I think it's having its best day since Mid-november at the moment as people Start to see the appreciation of yields They start to potentially think that Still as i mean as federal reserve fed Chair um
Jerome powell said the reason yields Remain so low is because money's coming From abroad it still looks like Appetizing to buy into u.s yields right Now Yeah We are above the rest of the world uh But our inflation is above the rest of The world so There's a uh We economists say if there's a lot more Inflation in the us than the rest of the World the dollar should appreciate but In the short run people just look at the Yield differential and if they see the The the ten year going up and short Rates going up you will see strength in The dollar however you take a look at The trade deficit reaching all-time Record a lot of dollars Are flowing abroad so i'm not sure by The end of the year whether we're going To see that strong a dollar What about with regards to some of the Developing nations that aren't really Developing nations anymore and i'm Referring to china here and the Competitive pressures between Investment dollars which seem to still Want to go to china of course the u.s is Always going to be the u.s i'm wondering How investors sort of away i guess the Pros and cons of both of those scenarios Well you're perfectly right i mean
International investing has been a great Disappointing emerging markets which by The way sell at very reasonable 15 16 Times earnings with with yields of 4 5 Many of them uh uh just are not Attracting the dollars the growth is in Tech tech Start as we all know in uh in kova 2020 And 2021 I will the tables be turned this year uh It might be i mean if you take a look at The valuation differential between the U.s and europe and emerging markets it's Nearly at an all-time high right now Professor goldman sachs even morgan Stanley i think out with some big notes This morning talking about the year of The stock pickers market is this the Year for further active management Well you know i've heard that before And then when we come to the end of the Year all the active managers Underperform I mean Who could how many outperformed s p last Year it must be nearly a record Low so you know i hear that sometimes i Hear it from people who want to justify The fees that they charge however Given the fact that you know maybe we're Going to see a value resurgence some of Those uh Non-fang stocks might do well and we
Might finally see uh some of the stock Pickers over performing uh the average In 2022 but certainly if you take a look At last year or really the last five Years certainly that has not happened
