Wharton’s Jeremy Siegel sees investors flocking to these stocks to protect against inflation

Published Wed, Jan 12 20221:27 PM EST

Wharton School finance professor Jeremy Siegel told CNBC on Wednesday he believes investors will look to own dividend-paying stocks in 2022 to shield against inflationary pressures. Appearing on "Halftime Report," Siegel stressed that equities, as an asset class, remain considerably more attractive than bonds in a period of hot inflation. However, the author of seminal investing book "Stocks for the Long Run" said people need to be more selective about what companies they own. "Dividend stocks are protected against inflation because firms have been able to raise their prices, their cash flows, and increase their dividends. I think that's what investors are going to seek in 2022," said Siegel, who warned throughout much of last year that inflation was going to be more persistent than Federal Reserve officials expected, necessitating tighter monetary policy. The U.S. central bank has since adopted a more aggressive outlook and is widely expected to raise interest rates — a key lever it can pull to tamp down on inflation — multiple times in 2022. "You could go to TIPS at minus 1% [yield]. That's not an answer," Siegel added, referring to Treasury Inflation-Protected Securities that are traditionally viewed as a way to guard against inflation. "You have dividend-paying stocks at 2.5%, 3%, 3.5%, 4% [yield] — well-protected dividends that are rising, and you have capital gains." Siegel's appearance Wednesday came after the Labor Department's consumer price index for December jumped 7% year over year . It was the hottest inflation reading in nearly 40 years, continuing the trend of significant price pressures in recent months during the Covid pandemic. Last month, Siegel told CNBC he expected 2022 to be a positive year for the stock market overall, despite the prospect of the Fed raising its benchmark rate from its near-zero level. "In the first year of the rates hikes, actually that has marked good stock markets," Siegel said on Dec. 10. "Maybe late 2022 or 2023 [is] when you begin to get the wobbles in the stock market." While Wall Street has ultimately had a wobbly start to the new year, Siegel said he believes the rotation into cyclical stocks that's played out so far in 2022 will have legs. For example, the iShares S & P 500 Growth ETF is down more than 2.5% year to date, while iShares S & P 500 Value ETF is up more than 1%. The broad S & P 500 is down nearly 1% overall to start the year. "Stocks are real assets. What higher real rates does mean is the rotation that we've been talking [about] — and certainly that happened in the first week of this year [is] going to happen throughout the rest of this year," Siegel said Wednesday as stocks moved higher despite the hot inflation report. Investors seem to be taking solace that the price data was high but as expected in a continuation of the rebound rally in tech stocks — now in day three — from last week's rout.

Jeremy Siegel

Scott Mlyn | CNBC

Wharton School finance professor Jeremy Siegel told CNBC on Wednesday he believes investors will look to own dividend-paying stocks in 2022 to shield against inflationary pressures.

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