U-Turn...

 

Long-term market bull Jeremy Siegel expects a serious pullback that it isn’t tied to the Covid-19 surge risks.  His tipping point: a drastic change in Federal Reserve policy in order to deal with hot inflation.

“If the Fed suddenly gets tougher, I’m not sure that the market is going to be ready for a U-turn that [chair] Jerome Powell may take if we have one more bad inflation report,” the Wharton finance professor told CNBC’s “Trading Nation” on Friday. “A correction will come.”

The consumer price index surged 6.2% in October, the Labor Department reported earlier this month. It marked the biggest gain in more than 30 years.
Siegel criticizes the Fed for being far behind the curve in terms of taking anti-inflationary action.

“Generally, since the Fed has not made any aggressive move at all, the money is still flowing into the market.”  “The Fed is still doing quantitative easing.”
He speculates the moment of truth will happen at the Fed’s Dec. 14 to Dec. 15 policy meeting.

If it signals a more aggressive approach to contain rising prices, Siegel warns a correction could strike. Despite his concern, Siegel is in stocks.

“I am still pretty fully invested because, you know, there is no alternative,” he said. “Bonds are getting, in my opinion, worse and worse. Cash is disappearing at the rate of inflation which is over 6%, and I think is going higher.”

Siegel anticipates rising prices will stretch out over several years, with cumulative inflation reaching 20% to 25%.