Inflation may be a bigger problem than the Federal Reserve thinks, some analysts say. The Fed, they have been sending the message for months that it is a temporary rise caused by the resumption of economic activity after the pandemic. However, experts advise investors to protect themselves against it, and the most affordable and safe formula today is gold.
According to Siegel, “inflation, in general, is going to be a much bigger problem than the Federal Reserve realizes. There is going to be pressure on the Fed to speed up the process of withdrawing from the aid program , and I don’t think the market is ready for this acceleration yet . ”
In an interview broadcast by the CNBC television network, Jeremy Siegel, emeritus professor at the prestigious Wharton School of Finance, at the University of Pennsylvania, has warned investors of the danger that inflation represents for the markets.
In the opinion of this finance expert, the biggest risk facing Wall Street is that Federal Reserve Chairman Jerome Powell abandons liquidity monetary policy much sooner than expected, due to inflationary pressures: “we all know that much of the lightness in the capital market is related to the liquidity that the Fed has provided. If this liquidity is going to disappear more quickly, that also means that interest rates are going to rise sooner than expected. And both issues are not positive for the stock markets.
In the interview with CBNC, Siegel was particularly concerned about the impact on some sectors, especially technology, and predicted that the Nasdaq, especially exposed to this sector and which is 5% from its all-time high, will suffer the higher losses.
As for bonds, Jeremy Siegel noted that "their yields are low , so investors are not going to want to lock themselves into long-term government bonds that are going to suffer quite dramatically over the next six months. "
This inflationary scenario may benefit other assets such as commodities and, especially, gold. In his opinion, the precious metal constitutes a relatively cheap protection against inflation, which many investors are abandoning due to the growing popularity of bitcoin: “I remember that in the inflationary stage of the 70s, everything turned to gold , collectibles and precious metals. But today in our digital world they are turning to bitcoin and I think gold is being ignored. ”
