At the beginning of 2023, there weren’t many bulls on Wall Street. Analysts and CEOs were recovering from a tough year in which the S&P 500 dropped nearly 20% and tech stocks dominated. Nasdaq Compound crater 33%.For most people, morale is lowBut Wharton University professor Jeremy Siegel was optimistic.
“The U.S. market is up 15% to 20% and it should be a very good year for stocks,” he said in WisdomTree’s weekly commentary. insider. “Many people think we have to wait until the second half of the year for these gains, but I expect this to happen in the first half.”
Siegel turned out to be right. The S&P 500 is up just over 13% year-to-date, and many Wall Street bears are not very bearish in the meantime. But Siegel does the exact opposite and once again stands apart from the crowd.
“It’s hard to see a lot of upside in the market in the second half of the year,” he said. told CNBC “I wouldn’t be surprised if that happened,” he said on Monday, noting that many cyclical stocks are already “pricing in a mild recession.”
Although the unemployment rate last month remained near pre-pandemic lows, Siegel pointed to the rise in unemployment claims, especially in the past few weeks, as evidence that the economy was slowing under the weight of the Fed’s rate hikes. “The number of unemployment claims is not good,” he said. Weekly initial jobless claims hit 264,000 earlier this month, the highest since October 2021. data According to the Bureau of Labor Statistics.
Siegel also pointed to potential headwinds to stocks of “softer earnings” and the impact on consumer spending from the resumption of student loan payments. According to one report, Americans will be paying about $18 billion a month when student loan payments resume on Sept. 1. estimate From investment bank Jefferies.Economists believe that this cost is slow So far, consumption expenditure has been amazingly resilient In the face of high inflation and rising interest rates.
From June 16th to 19th, Morgan Stanley surveyed nearly 2,000 student loan borrowers, 37% said they would need to cut back on spending in other areas to meet their monthly loan repayments after reopening, and 34% said they would have no repayments at all. I replied that I could not.
“Seeing student loan payments start up and unemployment claims rising, I’m not talking about disaster, people are saying, ‘Well, what’s up? I don’t see that many factors,” Siegel said.
Rising home prices and mortgage rates have also slowed consumer spending, which accounts for about 70% of gross domestic product (GDP) growth, making a recession more likely, Wharton said.
“The cost of owning a home has tripled in the last three years. And what happened to real income? He claimed he had no money to buy “everything else to keep the economy going.”
Siegel has consistently criticized the Fed’s fight against inflation over the past year, claiming it has raised interest rates. too fast and too expensivea recession is becoming more likely, but there is at least one way to look positively at the upcoming mild recession.
“The bright side of a mild recession is not only that we can’t raise rates, but I think there’s still a rate hike — I’ve been saying this even though everyone thinks it’s not possible –[a chance] “There will be a rate cut by the end of the year.”
This story was originally Fortune.com
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