- Jeremy Siegel sees a 30% probability of a recession and expects the stock market to reach new heights.
- The “Wizard of Wharton”, according to him, may have finished raising interest rates. He also suggested that they could be cut if needed.
- Professor retired views strong US economy positive for stocks and company profit.
Jeremy Siegel believes that stocks are heading to new highs and the chance of a recession is down to 30%.
In his optimistic “Wizard of Wharton”, the “Wizard of Wharton”, issued this forecast WisdomTree Weekly CommentaryPublished on Monday. He suggested that the Federal Reserve could be done raising interest rates. They might even reduce them if they are needed. He also praised the recent strength of the US economy as a powerful support for consumer expenditure, corporate profits and asset prices.
Siegel wrote, “Last Week was the best press conference Powell delivered in his role as Fed chairman.” He praised Powell for having a balanced view of the inflation threat and the risks associated with tighter lending. Powell indicated that more rate hikes weren’t guaranteed, but would depend on what economic data came in.
Siegel stated that “this is a welcome development for markets.”
The retired Wharton Finance Professor recalled the dire situations earlier this past year, when several regional banks collapsed and commodity prices dropped in May.
He contrasted this with the current background: house prices rose for the fourth consecutive month in June, after falling for seven months straight, the money supply has grown again, and given the continued strength of the economy, the Fed does not seem to have overdone its rate increases.
Siegel also noted that the US Gross Domestic Product (GDP), which is the country’s measure of economic output, rose by 2.4% in the last quarter. Jobless claims for July were modest, and consumer confidence remains high. The robust performance has slashed the chances of the “greatest fear for markets” becoming a reality, he said.
He wrote: “I have lowered my recession probability to below 50%.” If I had to estimate a probability of recession, I’d say perhaps 30%.
He added, “We don’t yet have an economy that is booming at breakneck speed. But the reports we received recently indicate a healthy economy.”
Siegel warned, however, that the flurry in credit-card payments, tuition and student-loan refunds could erode consumer demand – the engine of the US economic system. He said that the Fed could respond by cutting interest rates, particularly if unemployment increases and the Biden Administration puts pressure on Powell before the presidential election in 2016.
Siegel stated that “all this economic outlook is good for stock and earnings.” “For the moment, it appears that the markets will reach new highs.”
Veteran economist and commentator Share this articleA similar outlook was also seen during a CNBC interviewOn Friday,
“Lower prices, stronger economies and good advice and profits,” he said. “What is going to stop this market?”
