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Jeremy Siegel is wary of stocks, predicting a recession and not expecting the Fed to raise rates again.
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Retired professor Wharton wonders whether the stock market will continue to soar or hit new lows.
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Siegel expects a gradual recession and the Fed to end its fight against inflation to minimize job losses.
Jeremy Siegel predicted that the stock market rally would falter, the US economy would slip into a mild recession, and the Federal Reserve would not raise interest rates any further.
The S&P 500 is up more than 20% from its recent lows, marking the beginning of a major crash. bull market. But Siegel warned that his stock recovered more than 20% during the dot-com and housing market crashes, but quickly wiped out all that gain.
“This recent bull market move is no guarantee that we will get out of the recession,” said the former Wharton University finance professor in his book. weekly commentary WisdomTree article, published Monday.
“I’m still cautious and don’t think we’re going to start a big rally here,” Siegel continued, adding that stocks are also unlikely to fall below their October lows.
A veteran economist and author of “Stocks Over the Long Run,” he also commented on the future direction of Federal Reserve policy. The U.S. central bank has raised interest rates from virtually zero to more than 5% since last spring in a bid to cool historic inflation fueling fears of falling asset prices and recession.
The Fed is widely expected to raise interest rates next month, but Mr. Siegel suggested he may refrain from tightening further.
“We’re in the political season and there’s already a lot of pressure not to trigger a deep recession,” he said, referring to next year’s U.S. presidential election. “I would probably expect a shallow recession that the market is already expecting.”
Siegel emphasized the importance of unemployment data in determining the Fed’s next move. He said any signs of a weakening labor market could cause the central bank to stop fighting inflation to avoid potentially losing millions of jobs.
The market leader also suggested the Fed could raise its inflation target to 3% from 2% if the current threat subsides. Siegel said allowing higher inflation would give the Fed more room to cut interest rates during an economic downturn or if growth begins to be undermined by an aging U.S. population and declining productivity.
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