Jeremy Siegel, a finance professor at the Wharton School of Business at the University of Pennsylvania and a major figure on Wall Street, believes that despite rising inflation, interest rate fluctuations, and geopolitical risks, "stocks are still a good place to invest.
On Monday, Siegel said in an interview that investors should continue to be bullish on stocks rather than bonds, as productivity growth is partly due to the increasing popularity of artificial intelligence (AI) and economic growth remains strong.
Siegel observed that the GDP growth of the United States in 2023 was approximately twice that of 2022, although employment growth this year was only half of last year. With the improvement of company efficiency, this dynamic highlights the current environment of productivity growth.
I think the prospects for artificial intelligence are real. This year, our growth is driven by productivity. Productivity driven growth will lower inflation, benefit profits, but also drive up yields. Higher real growth rates, more borrowing, more capital investment, I hope to invest in stocks instead of bonds
If higher bond yields are more driven by the ongoing deficit in the United States than strong economic growth, it may mean higher inflation rates in the future. However, this situation is in line with Siegel's belief that stocks are better than bonds.
Where do you want to go in the face of a huge deficit? Stocks or bonds? You want to invest in stocks, "Siegel said. He implied that the stock market has always been an excellent tool for hedging against inflation.
On the other hand, despite the recent rise in geopolitical risks (the Russia-Ukraine conflict, the Palestinian Israeli conflict, etc.), this is not enough to deter Segal. In fact, he believes that these risks are a reason to buy stocks rather than sell them.
He said, "If we look back at history, geopolitical issues are usually buying opportunities. It is clear that the situation in the Middle East may get worse before it improves... What is the most famous sentence in the market? Stocks climb the wall of worry, and when the sky is clear, buying is too high. I really believe that in the long run, geopolitical risks are buying opportunities, not selling stocks
Siegel attributed the 8% decline in the S&P 500 index since July to the rise in interest rates, because the yield of the 10-year U.S. treasury bond bond is close to 5%. But in Siegel's view, the rise in interest rates was driven by stronger than expected economic growth, which should be a good omen for the future profitability of enterprises.
He also believes that the most important thing is that the stock market can cope with rising interest rates.
In the long run, although these actual returns are definitely higher than the levels of the past 10 to 12 years, they are not high historically. If we have real growth, this is the source of these high returns, and I don't think this is detrimental to the stock market, "Siegel said.