Billionaire investor Ron Baron predicts significant gains in the stock market over the next fifty years, driven by persistent inflation that will result in a doubling of prices.
In a recent interview on CNBC, the CEO of Baron Capital highlighted the growing pessimism among investors due to concerns about a potential recession, higher interest rates, and geopolitical challenges.
Baron, however, disregarded these dangers because he believed they had little bearing on the market’s long-term rising trend and general trajectory. He estimated that stocks have increased their value by 34 times since 1970, despite enduring various wars, recessions, and pandemics. The economy has also expanded tremendously; the most recent quarter’s GDP hit $26 trillion, a startling leap from $1 trillion in 1970.
Baron confidently predicted that US economic growth will continue to accelerate, surpassing 7% over the next fifty years.
“I anticipate that inflation will persist as it always has in every democratic nation throughout history, averaging around 4-5% annually,” Baron remarked. “This means your investments will multiply 35 times over the next five decades. Consequently, the Dow Jones, currently at 34,000, would reach 900,000,” he added, assuming a growth rate of at least 7%.
Other experts have observed that heightened inflation could drive stock gains, as increased prices lead to higher corporate earnings. However, consumers may face greater financial burdens due to the doubling of expenses in around 14 to 15 years, according to Baron. He further commented that while inflation may experience slight fluctuations, a prolonged period of lower inflation is unlikely.
The May Consumer Price Index report recorded a 4% increase in prices, a decline from the peak witnessed last year but still considerably above the Federal Reserve’s 2% target. Officials have suggested that interest rates may remain tight until the central bank effectively addresses inflation, although higher rates could exert downward pressure on asset prices.
Based on the CME FedWatch tool, investors are currently pricing in a 72% probability of the Federal Reserve raising rates by another 25 basis points during their upcoming July policy meeting. If implemented, this would result in a Fed funds rate target range of 5.25-5.5%, the highest level since 2007.
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