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Siegel Envisions Next Growth Wave

Jeremy Siegel, professor of finance at the Wharton School of the University of Pennsylvania and author of The Future for Investors, says today’s nay-sayers are taking a far too narrow view of the world. And, he contends, the next great wave of growth will be in the developing world.

According to Siegel, the expansion of China, India and other developing countries will have a huge impact on world capital markets. Why?

Because today’s capital markets are global, and capital flows to the countries offering the best returns (and away from countries where returns are low).

In the future we can expect to see the fast-growing firms in India and China increasingly tapping the U.S. capital markets...upping the demand for our funds and driving interest rates higher.

The best-selling author says raising rates demonstrates a realistic and upbeat assessment of growth prospects not only in the U.S., but around the world. “Our economy no longer needs artificially low interest rates that have caused bubbles in both commodity markets and housing prices.”

Siegel says the future looks bright because the developing countries, despite comprising 87% of the world’s population, produce less than one-quarter of the world’s output measured in dollars. It’s likely that they will produce over half the world’s GDP by the middle of this century...becoming the dominating factor in the world’s capital markets.

So investors should not succumb to the pessimistic forecast of government agencies and others who bemoan the aging of the U.S. population. Fed Chairman Alan Greenspan is finally showing the markets that our historically low interest rates are unjustified.

Siegel says those pessimists currently buying bonds to protect themselves against the widely predicted economic downturn will soon be sorry that they bet against growth.