The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Peeking into 2021


When I enjoyed some graduate work at the Wharton School of the University of Pennsylvania, I especially enjoyed meeting Dr. Jeremy Siegel.  Shy, self-effacing, and slightly bumbling, he was the stereotypical professor . . . except he is also a brilliant investment strategist.  Here are some of his most recent observations.

  1.  Inflation will be picking up, to the 4-5% level, caused almost entirely by the huge increase in money supply, required for pandemic relief.  This rate is higher but not worrisome, as he expects it will be temporary.

  2. Traditionally, we believe the Fed can control short-term interest rates but not long-term interest rats.  Dr. Siegel thinks demographic factors are changing this, and the Fed will have very little control over either rates.

  3. The 40-year bull market in bonds has been the longest bull market in history for any asset class, but it is over.

  4. Trump’s unilateral approach to trade may be over, but it will be tough for Biden to rejoin the TPP, due to conservative Democrats.

  5. He believes the same conservative Democrats will prevent the Biden tax plan from being burdensome, regardless of the outcome in the Georgia runoff.

  6. The cheaper dollar will help emerging markets, which has lower evaluations now, relative to the developed markets.

  7. The pandemic has super-charged growth stocks, but the market will rebalance into value stocks next year.

  8. He worries that ESG stocks have become too fashionable too soon.

  9. He does NOT believe stocks are currently over-priced and does think the bull market will continue.

He also shared an experience from last February, when he surveyed “100 members of a sophisticated group of analysts” and gave them 7 choices as to the cause of the next bear market.  Only one person identified a pandemic as the cause of the next bear market, showing how difficult it is to see-around-the-corner.

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