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the dow surging 464 points to a record close and the rotation away from growth stocks continued yesterday check out just how far the dow has come since march 11th of last year when the who declared the pandemic it's been a year and you could see the markets drop leading up to that day and then what's happened since been kind of phenomenal the dow up 27 percent joining us right now is jeremy siegel he's professor of finance with the university of pennsylvania's wharton school and jeremy you've got a really interesting take on what comes next we just have the stimulus bill that passed what do you think that leads to i think that's more fuel on the fire so to speak uh last night i went ate in a restaurant inside the first time in a year uh more and more people are going to be doing that it was a great feeling uh you know there's this pent-up demand uh i think this economy is really going to do great before this bill and now there's more money but particularly i pointed out for nine months how much money record amount of money in the system that's gotta go to financial assets and i do believe much higher inflation and uh higher interest rates but i i think stocks will be able to surmount these higher interest rates even though there will be pressure on on the fed hey when when are you going to start to slow you know slow down this higher inflation but the biden administration wants this economy to run hot and there'll be a lot of political pressure uh to let it do so so let's break that down a lot of different ways because to this point jeremy a lot of people have thought if bond yields rise that that is going to mean that um stocks will go down that bonds will look more attractive as a result tepper said he thinks there's going to be a cap on bonds but that's that's a separate story let's just say you all get to the same conclusion you think stocks are the place to be but you think bonds are going to rise too why do you think that stocks will stay attractive in that environment well let's just assume bonds go to two and a half or three yeah they in if in an environment where we have a four or five percent inflation which i really think is is going to happen that's still not attractive at all remember stocks are still real assets they're claims on real capital real ideas copyrights intellectual property etc they're going to maintain their value in an inflationary environment uh dividend paying stocks dividends go up with inflation bond yields uh uh if bond yields are rising you take a double hit on a you have less purchasing power on the bond and the bond price falls so we can't take advantage today of a bond yield 3 a year from now it actually makes the bond market that much worse compared to stocks and that's why the money i think is going to continue to flow into the stock market so you think the stock market is being short-sighted when they look at higher yields and start thinking okay the comparison here maybe that's more attractive you think this is just a short-term short-sighted sort of move how long are you looking down the road before the market figures this out well eventually there will be a thread tightening um and eventually you know that that tightening is going to pressure stocks and that fear of that i think is beginning to come through now but when i see the amount of stimulus come i i can see another 10 rise in stock prices 10 12 this year then the fed gets more worried and the leveling off 2022 2023 but this we're still in the phase where the liquidity is going to push stocks over we're going to get those little uh you know fears that are coming through but it's going to be overwhelmed i think by the the strength of the economy and the rise of corporate earning
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