While many investors have been growing fearful in recent weeks, hedge fund guru Ron Baron says he’s still confident stocks are the place to be, in part because of their ability to withstand inflation.
“The stock market is setting up like a springboard right now,” Baron tells Fortune. He notes that the stock market has gained only about 20% in the past dozen years, while the S&P 500’s earnings per share have more than doubled. He thinks stocks are valued at about half what they should be valued. He says he’s telling investors and analysts who work for him that “it’s not inconceivable that their money is going to increase eightfold in about 25 years.” Baron also thinks that inflation is on the rise, which will be a big headwind for cash and bonds.
Expressing a contrarian point of view, Baron also says the fear in the stock market is actually encouraging, explaining that “you’re supposed to buy stocks when news is really bad and sell when everything is really good. … People always think the wrong thing at the wrong time.”
Fortune also interviewed Leon Cooperman, another top hedge fund manager, and he too is bullish. He says business conditions are improving, and says stocks are attractively valued. “By default, stocks are the best house in the neighborhood, and if all goes well, it could be a really great neighborhood,” he says.