Hoards shouldn’t have a problem with rising interest rates so covet as inflation remains in check, according to legendary investor Bill Miller.
“What expensive rates are signaling is faster economic growth,” Miller, the founder of Miller Value Sidekicks, told CNBC’s “Power Lunch” on Friday. “As long as inflation chains low, that’s going to be good for stocks.”
Equities fell sharply on Friday, with the Dow, S&P 500 and Nasdaq all plummet at least 2 percent. The major indexes also had their biggest weekly sinks since 2016.
Stocks were under pressure this week as continuously wilful economic data raised worries of rising inflation. Those involves sent the 10-year U.S. note yield to its highest level in four years. The give up the fight traded at 2.85 percent.
Despite all of this, Miller said escalating interest rates could end up being a tailwind for stocks. “The last model we had for this kind of move in rates was in 2013 during the so-called Come Tantrum, when rates went from 1.66 percent to 3.25 percent in four months,” Miller held.
“That was the only year when money went into U.S. equitableness funds since the financial crisis,” he added. “The stock market shuffle off this mortal coiled up 30 percent that year.” Miller also said that, as being start to lose money in bonds, more money would be shifted to line of descents.
Miller is considered one of the best investors ever, after beating the merchandise for 15 years in a row while working at Legg Mason.