The stock market will face a 'day of reckoning' this year when an inevitable inflation spike forces the Fed's hand, says Wharton professor Jeremy Siegel

• Wharton's Jeremy Siegel said the stock market will face a "day of reckoning" sometime this year as inflation spikes.
• He forecasts an uptick in inflation will force the Fed to change its accommodative policy and that will spook stocks.
• He also said inflation will rise cumulatively 20% over the next four years.

The stock market will face a reality check at some point in 2021 when a spike in inflation forces the Federal Reserve to change its policy stance, according to Jeremy Siegel.

The Wharton professor of Finance told CNBC on Friday that he expects the Federal Reserve to pull back its accommodative policy, which has long driven gains in stocks, sometime later this year.

This is despite the fact that the Federal Reserve has signaled it will keep interest rates near zero until 2023. Fed Chair Powell and Treasury Secretary Yellen have also emphasized that any rises in inflation will be temporary.

But Siegel sees inflationary pressures as a real threat right now, in part due to the Fed's policy and also due to the trillion of dollars of stimulus from Washington. The professor expects inflation to rise cumulatively by 20% over the next four years.

"For the month of May and June, we're going to be getting to see the inflation that's going to come from this prodigious monetary and fiscal policy," Siegel said.

He added that Friday's disappointing jobs report only delayed the "day of reckoning" for the stock market, because it will give the Federal Reserve a little bit more time to continue its expansionary policy stance.

"There will be a day of reckoning down the road, there's no question about it," Siegel said. "I think later this year, we're going to get that Fed pullback. The market is going to ripple and act scared."

Read more: A 48-year market vet breaks down why a 'fragile' and over-leveraged stock market is on the path toward a 65% drop or more - and warns that investors are misreading how the Fed could react to an overheating economy later this year

To prepare for the "reckoning," the professor reiterated his recommendation of real assets, saying those will be the "best thing." Real assets tend to perform well during inflationary periods. He also said investors right now should be in stocks that hinge on a rise in economic activity, like cyclical stocks.

After Friday's jobs report signaled a weaker than expected economic recovery, investors piled into tech stocks, embracing the stay-at-home trade that dominated markets during the pandemic.

But Siegel said that the spike in tech stocks that occured right after the jobs report was announced was just a temporary "little bounce back" as bond yields fell.

"The 10-year yield is now above where it was before the employment report came out, so I think the market's going to show it later," Siegel said. "I think inflation is in the works."