Wharton School finance professor Jeremy Siegel told CNBC on Thursday he expects equity returns to moderate in the future, following a major recovery since the pandemic sell-off in March 2020. "I think long-term returns are not going to be as robust as they've been, certainly, over the last 10 years and maybe not even over the last 200 years but still far ahead of inflation and way, way ahead of fixed income," the longtime market bull said on "Squawk Box." Siegel referred to the old Wall Street adage that markets take the stairs up and the elevator down. "We're going up the staircase. I don't know when the elevator is going to come, but it looks like a momentum trade in the sense that it just keeps going up a little bit every day, no real news to propel it, and a lot of momentum players pilling on," added Siegel, who authored the famed investing book "Stocks for the Long Run." "We've had this before. It's very hard to say when it might end." However, Siegel said he thinks a catalyst for a sizable pullback in the stock market is an abrupt change in the Federal Reserve's highly accommodative policy, which was put in place in March 2020 to support markets and the economy during the Covid-19 crisis. Here's how he described the scenario: "I think overreaction by the Federal Reserve and saying, 'Oh my God, we're really far behind,' because I don't think the inflation news is going to moderate the way they hope, and then they start sharply raising rates, a little bit of disappointment then on the earnings — I'm not going to say that starts a secular bear market, but certainly could be something that causes the next significant correction in equity prices." Siegel has contended for months that Fed Chairman Jerome Powell is misguided in believing many of the inflationary pressures rippling through the U.S. economy during the pandemic reopening will be temporary. The U.S. central bank is widely expected to pare back its monthly bond purchases, in a process known as tapering, by the end of this year. However, Powell said last week there was "much ground to cover" in the labor market, an indication that a hike to interest rates is not looming around the corner despite hot inflation readings. Siegel previously has told CNBC that owning "real assets" like stocks is the best defense against inflation . Watch the full interview with Wharton School's Jeremy Siegel above.
Scott Mlyn | CNBC
Wharton School finance professor Jeremy Siegel told CNBC on Thursday he expects equity returns to moderate in the future, following a major recovery since the pandemic sell-off in March 2020.