While counterintuitive, star value investor David Dreman predicts that inflation and stocks will rise at the same time.
“I think we’re factoring in some pretty major inflation,” the chairman and CIO of Dreman Value Management told CNBC.
With the Treasury issuing billions of dollars of bonds to finance the budget deficit, the Federal Reserve “has been printing money 24/7,” he says.
“That’s been going on pretty much worldwide, and it’s got to have its toll. Not now, but two, three, four years out, I think we’re going to see inflation probably as bad as say the ’77 to ’81 period, when it was about 12 percent annually.”
But here’s the surprising kicker.
“Inflation is really very, very good for both stocks and real estate over time,” Dreman says.
“Markets stay up with inflation, even hyperinflation.”
So he remains bullish on stocks. “We will see markets go down some, and we’ll certainly have our volatility,” Dreman says.
“But all in all, I think we’re in a market that will go up much higher over the next three to five years.”
Ace money manager Mario Gabelli also sees stock gains ahead.
"A lot of bargains” will arise among U.S. stocks for investors in the next year as consumer spending rebounds, helping the economy to do the same, he told Bloomberg.
“The world is simple. You just want to find the best ideas, risk adjusted,” Gabelli says.
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