In his annual interview with Advisor Perspectives that took place last month, Wharton finance professor Jeremy Siegel offered the following market insights and observations:

• “We have to marvel at how well the market’s done despite the recession and COVID crisis,” Siegel argued, adding that he predicted the Fed’s huge injection of liquidity would be a positive for the stock market. He noted, “We know that stocks are the longest-lived assets—and they are anticipating a great 2021. I predict the bull market will continue next year. Stocks are not overpriced.”
• The lack of a second round of stimulus was a “big disappointment,” according to Siegel, who added, “I’m not going to give up hope, although I think it’s a long shot that we will have something before January.”
• Positive vaccine results, he said, “strengthen the case for a robust 2021.”
• Regarding expected secular changes in the economy, Siegel argued that the pandemic accelerated trends that were already occurring and started new trends. “Obviously,” he said, “the trends towards the decline in traditional retail and the surge of online buying were accelerated. But the ease with which so many people, white-collar workers in particular, can work at home, has caused us to rethink office-space requirements and the amount of time people need to spend commuting.” He predicts that office space will be “challenged for a long time,” and business travel will decrease.
• Siegel is uncertain whether the migration out of cities and into the suburbs will continue: “There are positives and negatives for cities. If people don’t have to commute, then the reason for some people to live in the city is reduced. However, the arts, museums and live theaters will come back.” That said, Siegel suggested that second homes will see a boom: “Many will have a home in or near the city and also in places where they enjoy being—the mountains, shore, rivers or lakes.”
• Regarding inflation worries, Siegel said, “I disagree with the premise that fiscal deficits and private-sector debt keep inflation low.” He predicts that we will see more significant inflation for the next few years than we have seen for the last two decades (3% to 5% per year, well above the Fed’s target of 2%) because, due to the pandemic, we’ve seen the “largest increase in the money supply since World War II.”
• Low bond yields, Seigel argues, are “not caused by central banks keeping the short rate very low. There are very strong economic forces that are keeping record low rates,” he said, citing demographics, aging populations, longer life expectancy, increased saving and risk aversion among them. He noted that bonds have become “the hedge asset of choice for short-term managers to cushion equity risk,” and Treasury securities “usually jump in price when equities fall.”
• The 40-year bull market in bonds (which started in 1981) has ended, says Siegel: “We will never in our lifetime, and maybe our children’s lifetime, see long-term Treasury yields as low as we saw them this year. I see higher inflation and strong economic growth that spells the end of this long bull market.”
• With a Biden presidency, Siegel foresees a “much more multilateral approach to trade policy.”
• Regarding strong asset classes, Siegel expects that a weaker dollar will help emerging markets due to their “dollar indebtedness.”
• Siegel contends value stocks will benefit from investors’ search for yield: “I believe value will outperform growth stocks in 2021.” He added his prediction that residential real estate will continue to do well but commercial properties will suffer.
• As the Covid-19 vaccine becomes increasingly available, Siegel argued, there will be “a lot of pent-up demand for theme parks, travel and cruises” in 2021.