Nasdaq Will Fall Into Bear Market, Wharton’s Siegel Says

(Bloomberg) — A “rocky” period for U.S. equities is far from over, with tech-rich Nasdaq indices poised to fall into bear markets on the back of the Federal Reserve’s new zeal to slash inflation. , according to Jeremy Siegel, professor of finance at the Wharton School of the University of Pennsylvania.

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The longtime market watcher said he expects more than four interest rate hikes this year, a risk that “equities are not really valued.” He sees the Nasdaq 100 down 20% from November’s record high, implying a drop of more than 7% from current levels.

“I don’t think the pain is over yet,” Siegel said in an interview on Bloomberg TV.

Shares slid precipitously across the board on Monday before rebounding as lower buyers emerged at the close.

The 76-year-old professor also sees a bear market brewing for the wider Nasdaq Composite gauge. He says the S&P 500 will be mired in a correction — defined as a drop of around 10% — a distinction it reached on an intraday basis at the height of Monday’s selloff.

Risk appetite took a hit ahead of this week’s Fed policy meeting, where the monetary authority is expected to signal an interest rate hike in March and a balance sheet reduction later this year to help fight inflation. Traders remain resolute in anticipation that the Fed will continue to raise borrowing costs even as riskier assets fall.

“We’re going to see on Wednesday that Powell is going to be pretty tough and pretty hawkish,” the professor said in the interview. Siegel sees inflationary pressures in the economy persisting throughout the year and prices could rise another 7%, as happened in 2021.

A host of technical signals also suggest that more volatility may be on the way. Siegel sees more fundamental challenges ahead, from the Fed struggling to quell price pressures to the spread of the omicron variant undermining first-quarter economic expansion.

“The Fed needs to stop this excessive liquidity growth,” Siegel said.

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