14 comments

Wharton Professor Siegel Agrees with me, “Inflation is Over!”

Dec 17, 2022, 8:32 PM

Forbes reports.

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%.

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comments (14)

docsavage2 years ago

The Fed held interest rates close to zero for over a decade. That led to massive distortions in the economy. Anyone predicting a soft landing where we can stop raising interest rates and get through this with only a mild recession is wrong. Peter Schiff tweeted back in August:

"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.

Mate272 years ago

^^ yet tye majority of people in the investment community are saying the fed will pivot by the end of next year and start to cut rates. Make no mistake about it, Fed Powell is ALL about trying to save face and gain credibility by raising as fast and furious just to cat h yo quickly so he can say “we did it’! All they have done is spook the markets. Never in history have we drained so much liquidity from the system with current tightening, but also we have had a lot of excess to soak up. It’s working, because much of the excess to begin with went to corporations and businesses, now they need to give it up.

shailynn2 years ago

I dunno dude when my strawberries aren’t $8.00 and a 12 pack of Diet Coke isn’t $9.00 I’ll believe you.

Muddy2 years ago

I'm also a Peter Schiff disciple I'm not buying it yet.

Warrior152 years ago

Go to the grocery store. When you come back, tell me that you think inflation is Dead .

Mate272 years ago

Tye professor never said prices weren’t inflated, he’s stating they aren’t goi f to go up anymore, essentially saying it is over. Inflation is the act of 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.

skibum6092 years ago

What a fucking turd. Bigger douchebag than Icee^.

RiskA2 years ago

Click bait for the day traders, who desperately want the return of the “rising tide” created by “free money” government policies. There’s still billions on billions coming into the money supply through persisting COVID “emergency” funding, the infrastructure/reparations bill, the new record budget, the social security bump, etc. ad absurdum. Inflation is the result of increased money supply without increased production, Econ 1A. How is that changing? The academic left’s focus on consumption economy rather than on the balance between production & consumption always leads to this result. Also, the Biden inflation isn’t “going away” (unless deflation starts): it will always be here, just not visible in the short term statistics. It becomes more irrelevant only as wages catch up, although an aging society living off accumulated wealth

Mate272 years ago

Friendly reminder to not be scared of the past cycle continuing, especially after today’s jobless claims rising, projecting a tighter labor market. Just a simple PSA for those preparing for the New Year. Even Scrooge changed his mindset at the end!

markets.businessinsider.com

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

mark942 years ago

“US stocks could surge 20% in the first 6 months of 2023 “

Or, they might drop 20%

Or, maybe pigs will fly

Not exactly a bold prediction. Or, any kind of prediction.

mark942 years ago

For 70 years, we had easy global trade. Those days are rapidly ending because the US is no longer prepared to use its military and economy to facilitate global trade. In fact, Americans are demanding jobs return to the US from Chinese factories.

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.

JamesSD2 years ago

The crazy inflation of early to mid 2022 has definitely slowed. Y'all are gonna have to get used to these prices being the new normal. Inflation ending doesn't mean you can buy soda for a nickel again.

Also some of you badly need Costco memberships.

mark942 years ago

Saying that inflation is “ basically over “ is a lot different than saying it’s “ over”.

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.

skibum6092 years ago

After my morning dump I realized it was smarter than Mate. Such a stupid little bitch, always wrong. Jeremy Siegal lol. Its like telling us Joe Biden is smart.