Billionaire investor Ron Baron says inflation will propel big stock market gains in decades to come, but everything will be ‘twice as expensive’

Ron Baron smiling while wearing a black crew neck sweater and white shirt and standing in front of an empty looking fish tank

Ron Baron, Chairman and CEO of Baron Capital Management.Baron Capital Management

  • Billionaire investor Ron Baron told CNBC that the Dow could top 900,000 in 50 years.

  • The seasoned investor said persistent inflation could fuel economic growth.

  • He said higher prices could bring big stock gains, but could make everything “twice as expensive”.

Billionaire investor Ron Baron said stocks will see big gains over the next half-century as persistent inflation makes everything “twice as expensive”.

The CEO of Baron Capital spoke to CNBC on Saturday about increasingly bearish sentiment in the market and investors worried about a potential recession, higher interest rates and geopolitical headwinds.

But those risks are irrelevant to the overall trajectory of the market, which has been rising for most of the past half-century, Baron said. Despite various wars, recessions and pandemics over the past few decades, Baron estimated that stocks were 34 times their value in 1970. Economic growth also soared during this period, with GDP reaching $26 trillion. in the last quarter, compared to 1,000 billion dollars in 1970.

Baron said economic growth in the United States will continue to accelerate, exceeding 7% over the next 50 years.

“I expect inflation to be like it always has been, like it always has been in every democracy that’s ever existed, 4-5% a year,” Baron said. “That means you’re going to have 35 times your money over the next 50 years. That means the Dow Jones, which is now 34,000, will be 900,000,” he later added, assuming a growth of at least 7%.

Other experts have noted that high inflation could fuel stock market gains as higher prices lead to higher corporate profits. On the other hand, it could lead to more pain for consumers:

“I think everything is going to cost twice as much in 14, 15 years,” Baron said. “Maybe it will go down a bit, but it won’t stay lower,” he said of inflation.

Prices hit 4% in May’s Consumer Price Index report, down from a 41-year high in the middle of last year but still well above the target for 2% from the Fed. Officials suggested that interest rates could remain tight until the central bank gets inflation under control, although higher rates could weigh on asset prices.

Investors are pricing in a 72% chance that the Fed will hike rates another 25 basis points at its July policy meeting, according to CME tool FedWatch. The move would raise the target range for the federal funds rate to 5.25-5.5%, the highest rate since 2007.

Read the original article on Business Insider

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