Wharton Professor Siegel Agrees with me, “Inflation is Over!”
Mate27
TUSCL’s #1 Soothsayer!
https://fortune.com/2022/12/16/inflation…
Those who say the professor is rong, SkiDumb, Tricky Rickyboi, and several old curmudgeons playing Ebenezer Scrooge. Copy and paste for your pleasure. You’re welcome, and I told you so since this summer!
Fortune
SEARCH
FINANCE INFLATION
Inflation is ‘basically over’ and the Fed is ‘making a terrible mistake’ by continuing to raise interest rates, Wharton professor Jeremy Siegel says
Jeremy Siegel warned that inflation was going to become a problem in 2020. Now, he says the Fed has done too much to fight it, and is set to cause a recession.
BY WILL DANIEL
December 16, 2022 2:55 PM EST
Traders work on the floor of the New York Stock Exchange (NYSE) on December 13, 2022 in New York City.
Traders on the floor of the New York Stock Exchange, Dec. 13, 2022. Spencer Platt—Getty Images
Inflation, as measured by the consumer price index (CPI), rose 7.1% from a year ago last month, and Federal Reserve Chairman Jerome Powell said this week that it will take “substantially more evidence” to prove that it’s on a “sustained downward path.”
But Wharton professor Jeremy Siegel says the CPI figure doesn’t represent reality.
“Inflation is basically over, despite the way Chairman Powell characterizes it,” he told CNBC on Friday.
Siegel points to falling rent and home prices as evidence that the majority of inflationary pressures in the economy are already gone. Throughout 2022, he has made the case that Fed officials are looking at backward data to assess the housing market, which gives them a false picture of the current level of inflation in the economy.
The Fed is “making a terrible mistake” by continuing to raise interest rates even as inflation comes down from its recent four-decade high, according to Siegel.
“I see no reason to go any higher than we are now,” he said on Friday, arguing that this year’s interest rate hikes have yet to be felt in the economy, and as they are, consumer prices will drop sharply.
“The talk of going higher and staying higher, I think, would guarantee a very steep recession,” he added.
When asked about the potential for rising wages to cause inflation to be sticky next year, Siegel pointed out that when accounting for inflation, Americans’ wages have actually fallen throughout the pandemic.
“Real wages have gone down. It’s hard for me to see that they’re pushing inflation up when they don’t even match inflation,” he said.
Real wages—or wages adjusted for inflation—dropped 1.9% from a year ago last month, the Bureau of Labor Statistics reported Tuesday. That’s a far cry from the 2% average annual real wage growth seen since World War II, Siegel said.
Siegel also noted that there has been a “structural shift” in the labor force in recent years that involves a smaller overall percentage of Americans working, and argued that the Fed’s interest rate hikes won’t help solve it.
“If people don’t want to work, then firms have to offer higher wages in order to induce them to work,” he said. “It is not the Fed’s job to suppress the economy because there is a structural supply shift. They take care of aggregate demand, not shifts in supply.”
It may make sense to listen to Siegel’s latest forecast, because he’s made some prescient predictions over the past few years.
In June of 2020, the Wharton professor told Barry Ritholtz, chief investment officer of Ritholtz Wealth Management, that inflation was set to rise and argued the Fed wasn’t anticipating it.
“I think for the first time, and I know this is a sharp minority view here, for the first time in over two decades, we’re going to see inflation,” he said, claiming that Fed officials had overstimulated the economy with years of near-zero interest rates.
Siegel turned out to be right. Inflation soared from just 0.6% when he made his forecast to over 5% in under a year.
But now, he says that Fed officials have done enough to slow rising consumer prices, and his new fear is that they may ultimately drive the U.S. economy into a recession with interest rate hikes.
However, if the Fed decides to pause or cut rates sometime next year, Siegel believes the S&P 500 will rally 15% to 20%.
Our new weekly Impact Report newsletter examines how ESG news and trends are shaping the roles and responsibilities of today’s executives. Subscribe here.
Most Popular
LIFESTYLE
How to watch the third-place play-off of the 2022 FIFA World Cup live online for free—and without cable
How to watch the third-place play-off of the 2022 FIFA World Cup live online for free—and without cable
December 17, 2022
BY
CHRIS MORRIS
SUCCESS
Henry Cavill sacked as Superman by new DC Studios chiefs—just weeks after being told to announce his return
Henry Cavill sacked as Superman by new DC Studios chiefs—just weeks after being told to announce his return
December 15, 2022
BY
CHLOE TAYLOR
FINANCE
The chief investment officer at the world’s biggest hedge fund says we’re headed for a recession that’s ‘double the normal length’—and it has a lot to do with China
The chief investment officer at the world’s biggest hedge fund says we’re headed for a recession that’s ‘double the normal length’—and it has a lot to do with China
December 16, 2022
BY
WILL DANIEL
SUCCESS
Gen Z is overwhelmed by ‘tech shame’ at work—and it’s keeping them quiet in meetings
December 15, 2022
BY
CHLOE BERGER
Rankings
40 Under 40
100 Best Companies
Fortune 500
Global 500
Most Powerful Women
World’s Greatest Leaders
World’s Most Admired Companies
See All Rankings
Sections
Finance
Leadership
Success
Tech
Asia
Europe
Environment
Fortune Crypto
Health
Well
Retail
Lifestyle
Politics
Newsletters
Magazine
Features
Commentary
MPW
Conferences
Personal Finance
Customer Support
Frequently Asked Questions
Customer Service Portal
Privacy Policy
Terms of Use
Single Issues for Purchase
International Print
Commercial Services
FORTUNE Knowledge Group
FORTUNE Branded Content
Fortune Data Store
Fortune Conferences
Advertising
About Us
About Us
Editorial Calendar
Work at Fortune
Behavioral Advertising Notice
Terms and Conditions
© 2022 Fortune Media IP Limited. All Rights Reserved. Use of this site constitutes acceptance of our Terms of Use and Privacy Policy | CA Notice at Collection and Privacy Notice | Do Not Sell My Personal Information | Ad Choices
FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. FORTUNE may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.
S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Terms & Conditions. Powered and implemented by Interactive Data Managed Solutions.
Got something to say?
Start your own discussion
14 comments
Latest
"Wharton's Jeremy Siegel couldn't be more wrong in believing that inflation isn't as big a problem now as it was in the 1970s, because the Fed has only been too loose for two years. QE and ZIRP began in 2008. Powell has a much bigger inflation problem to solve than did Volcker!"
Schiff was one of the few people who correctly predicted the housing crash of 2008. Interest rates set by the Fed are still lower than the inflation rate, so you still have a negative real interest rate. Real interest rates need to be positive to meet the Fed goal of 2% inflation. The Fed may successfully kill inflation, but it will require throwing the country into a serious recession. People who predict future high inflation think the Fed will pivot away from rate hikes as soon as we start to enter that serious recession.
Prices rising, not if prices have risen (which they have). Big difference, and for the average layman they don’t understand the difference, but it means a huge sign that equities are about to take a big bounce!
If your strawberries stay at $8 next year, then there’s no inflation from the present, unles s it goes up to $9. If you’re buying Diet Coke next year at any price, then that’s just poison.
https://markets.businessinsider.com/news…
US stocks could surge 20% in the first 6 months of 2023 as the Fed wraps up its inflation fight, Wharton professor Jeremy Siegel says
Theron Mohamed Dec 28, 2022, 10:49 AM
Read in app
Jeremy Siegel Wharton CNBC
Scott Mlyn/CNBC/NBCU Photo Bank/NBCUniversal via Getty Images
US stocks could soar up to 20% in the first half of next year, Jeremy Siegel said.
The Fed may cut interest rates to as low as 2% by the end of 2023, the Wharton professor said.
Improved worker productivity might shore up company profits and buoy stocks, Siegel said
Or, they might drop 20%
Or, maybe pigs will fly
Not exactly a bold prediction. Or, any kind of prediction.
This is changing the way the world economy operates. It will take 10 years for business to adapt to this environment. Each country will need to be largely self sufficient or form alliances with other countries for trade.
No longer will we buy our goods from the cheapest possible global source. This will result in a baseline rise in inflation as products are sourced from more expensive suppliers, many of them in North America rather than China.
Also some of you badly need Costco memberships.
I contend that some things, like rent and home prices, will go down in 2023 while some things, like food and energy, will go up. If that happens, Mate could ( and probably will ) argue that inflation is “ basically over”. Basically is one of those weasel words that lets prognosticators cover for their inaccurate predictions.
In 2022, inflation was 8%. In 2023, it will be a bifurcated 4%. Now, that’s a prediction.