7 Thoughts About Present Market Conditions: An Interview with Jeremy Siegel

While attending a series of meetings with representatives from Goldman Sachs, Citibank, and other top investment banks across the country, I spoke with Jeremy Siegel about his thoughts on present market conditions and how they compare to those of the past.

Jeremy Siegel currently serves as the Russel E. Palmer Professor of Finances at the Wharton School of Business as well as an advisor to WisdomTree Investments.  He regularly makes appearances on networks such as CNBC and CNN, and contributes as a writer for Kiplinger’s Personal Finance and Yahoo Finance.

Siegel’s predictions and assessments of the market are rarely inaccurate, as he predicted several market events in the past, including the tech bubble of the early 2000’s, the sharp recovery of the U.S. stock market after the Covid-19 pandemic broke out, as well as the poor performance for domestic equities in 2022.

Here are 7 thoughts from Siegel on where things stand this summer for investors:

1. Inflation is under control

Siegel spoke with a cautious-optimism about the most recent inflation figures and what that means for the stock market.  He praised the efforts of the Federal Reserve for acting quickly to combat rising inflation and stated that he does not see another interest rate hike as a necessary measure to win the battle against inflation.

2. The US economy is stronger than anticipated, but still not strong.

“The real economy is really hanging in there, which is remarkable. It’s the ideal environment for stocks,” Siegel added, while also pointing to June’s labor market numbers, which has cooled but remains relatively strong amid the Fed’s tightening efforts, with the US adding 209,000 jobs in June.

3. Oil prices will remain in the range they are in now for quite a while

Siegel reiterated his opinion from earlier this spring, in which he expressed that the recent spike in oil prices is not a sign of things to come, noting that OPEC cut the supply of oil due to recession fears caused by the Federal Reserve’s  over-tightening.

4. European equities are trading at very low valuations given historical data

Professor Siegel commented on the then-current PE ratio of the FTSE 100 Index and the tremendous value that it represented.  The Russia-Ukraine conflict and the disruption of the natural gas supply to most of Europe are to blame for the prolonged struggle that European and Asian markets are still experiencing following the global pandemic.

5. The “AI Movement” driving stocks higher has been seen before.

While he is not of the opinion that the US stock market as a whole is in a bubble, Siegel did comment on the bubble that may be surrounding companies that have attached their names to the so-called “AI movement”.  “We’ve seen this before with the Dot Com bubble followed by the bubble around blockchain technology,” Siegel added.

6. Don’t expect a robust 2^nd half of the year for the housing market

“Home prices more than doubled the cost of homes for buyers,” said Siegel.  When asked about the effect of rising interest rates, he added “Mortgage rates had ticked down to 6% a few months ago before rising back above 7% now — so perhaps we see some renewed softness in housing prices.”

7. S. Markets are still undervalued in the long-term

Siegel emphasized the value of having a long-term outlook while investing in stocks. Siegel asserts that despite their short-term volatility, equities have historically proven to be a very effective inflation hedge. For investors with a shorter time horizon, short-term earnings should be taken into account, but valuations dominate long-term returns.

The information contained herein is (1) for informational/educational purposes only, (2) is not a recommendation to buy or sell any investment, and (3) should not be construed or acted upon as investment advice. The information contained herein was obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness.