Wharton professor Jeremy Siegel says value stocks will outperform tech this year in 'the hottest economy we're going to see in a long time'

• Despite the bounce-back in the Nasdaq, Jeremy Siegel says value stocks will outperform tech this year.
• He believes returns from value stocks will continue to climb, increasing the popularity of non-tech investment.
• Siegel said he expects tech stocks to continue to correct but does foresee a crash.

Wharton School professor Jeremy Siegel is predicting a value stocks will be big outperformers on the stock market in the next year, as the economy recovers, he told CNBC's Trading Nation on Tuesday. Tech stocks, which have been under pressure in recent days, have further room to trade lower, but Siegel does not expect that correction to become a crash.

The Nasdaq Composite, which is tech-heavy, rallied by around 4%, marking its strongest daily performance in five months. Big name tech stocks including Tesla are booming - the electric car manufacturer rallied by almost 20% on Tuesday, thereby breaking a five-day downward streak. Strength in the tech sector has been fueled in the last year by extremely low bond yields.

With the US vaccine roll-out picking up speed, the economy is edging closer to fully reopening and bond yields have risen sharply in the past few weeks, reflecting greater investor confidence, but undermining the more highly valued areas of the stock market, such as tech.

The Nasdaq is around 8% below its recent record high - technically in correction territory. And while Siegel does not predict a crash, he does believe there is more room for tech stocks to decline.

"I don't think they're going to do badly. We're not going to have a crash like we had 20 years ago at all," Siegel said, referring to the bursting of the dot-com bubble in early 2000.

With recovery taking hold, investors are snapping up so-called value stocks - those stocks that are more closely linked to the health of the underlying economy - and Siegel expects them to continue to increase in popularity.

In large part, this is due to Covid-19 loosening its grip on the economy. With cases falling, the vaccine being rolled out at an ever-increasing speed and President Joe Biden's $1.9 trillion stimulus package soon reaching the economy, investor optimism is returning, Siegel said.

"This is just the hottest economy we are going to see in a long time," he said.

"In addition, I think the so-called value stocks are going to be sought out for their yield, because I think interest rates are still going to be headed much higher here on the long bond," he said, referring to the increase in yields on longer-dated government bonds that usually determine borrowing rates for products such as mortgages.

"The outperformers are going to be non-tech over the next six to 12 months" he said.