Jeremy Siegel Outlines 2023 Expectations for the Stock Market and Economy
- Jeremy Siegel is one market pundit who predicts stock market gains in 2023.
- In an interview with CNBC last Wednesday, the Wharton professor ridiculed the Fed and gave his 2023 predictions.
- Here are the top 9 quotes from Siegel’s interview on inflation, the economy, stock market.
Professor Jeremy Siegel from Wharton has been vocal in his belief that the Federal Reserve’s large interest rate hikes could cause long-term damage to the economy as more investors worry about a recession.
However, unlike other stock market outlooks he is bullish and calls to invest in 2023. upside of at least 20%.Because he sees inflation collapsing and a strong economy that many investors underestimate.
In an extended interview with CNBC last weekSiegel presented his views on the stock market’s future and how it will affect the economy next year. He also explained why Fed Chairman Jerome Powell could make a huge mistake.
These are the top nine quotes.
1. Why wages aren’t driving overall inflation
“We experienced a 5% year-overyear wage growth. We have 8% inflation. Workers are trying desperately to catch up but they’re not. They are still far behind. It is disturbing to me that the Fed policy is not to reduce wages so they fall to 2%. This basically says to workers, “You’re not going catch up to inflation and we’re going stop you from catching up with inflation.” Siegel said that it was an insane policy.
“So the idea of the worker trying catch up because he has lost so much purchasing strength is something the Fed must crush, and I don’t think it’s inflationary. It’s inflationary when wages leap ahead of prices, not when prices lag behind them.
2. The Fed’s Wednesday rate decision
“My feeling it’s 50 [basis points]. The data will be in, and they won’t even have any [rate hikes]February. If that happens, wow! That’s good news for stocks, bonds, and stocks… But, I feel that you don’t really need more than 50 basis points. 50 basis points might seem excessive.
3. Why Siegel is so critical about the Fed:
“Yes, I have strong opinions about the Fed. To be blunt, the Fed, which caused inflation by expanding liquidity faster than any other time, is talking to the worker as if ‘we’re going to let you catch-up to the inflation that we caused’. I find that it is a disgraceful act of disrespect for the American worker. I don’t believe that this is right.
4. Here’s where inflation is headed:
“I still believe [inflation is over]… and everything else I see on price front [is down]… I do not change my belief that inflation is almost over. This is catch up wages and the Fed should not be setting policies to stop it. There is overwhelming evidence that inflation is slowing.”
5. Where yields are from:
“I think [bond yields]I believe we will see slower growth as the economy continues to decline. This was not a hot topic. [November jobs] report. We’ll see a slowing of inflation. These are two great things for bonds, but they’re also good news for stocks.
6. This is where you can find out the current federal funds rate.
“I’m really sticking out here, but it wouldn’t surprise me by the end of next year that there will be a 2 handle on Fed funds rate. That’s a way out of consensus, I know this… But I just want to say that once we get this data in we’ll get down very fast.” Currently, the effective fed fund rate is 3.8%
7. When the Fed will start to lower rates:
“It’s not going to matter if it’s going to increase the rate by 25 basis points or something else. It will be when do we reduce the rate? This could be as early as the spring.
8. The potential for a recession by 2023
“Earnings matter, to put it mildly. We’ll be in a recession if the Fed keeps its hands tight. Earnings will not be $230 [per share for the S&P 500]Siegel stated that they will be $200 or $190 for a couple years or a year and a half.
“GDP for this year will be below 1 %… This is not strong. It’s not a recession yet. But, what if? [the Fed]It will be 6% and you’ll have it.”
9. The potential for economic growth in 2023
“We have 4.5 millions new workers and almost zero GDP growth. Next year, I expect to see much lower payroll growth and better GDP. Because of the record low productivity this year, it will reverse in 2023… The good news is that productivity will increase, which will improve margins and lead to higher profits.
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