Inflation in the US is a thing of the past, unemployment could rise, and stocks could rise 15% next year, says Jeremy Siegel. Here are Wharton’s 12 best quotes from this week.

  • Jeremy Siegel said the threat of inflation is over, but the unemployment rate is jumping.
  • The professor at Wharton argued that the US economy could still avoid a recession with the help of the Fed.
  • Siegel noted that the stock market has already bottomed out and could jump 15% next year.

Jeremy Siegel said in a series of interviews and commentaries released this week that the threat of inflation has passed, unemployment is expected to rise, and the US economy can still survive a recession.

The Wharton finance professor and author of “Stocks for the Long Run” has criticized the Federal Reserve for aggressively raising interest rates in response to rising prices. Moreover, he noted that the US stock market has already slumped, and could rise by up to 15% next year.

Here are Siegel’s top 12 quotes this week, broken down by topic and slightly edited for length and clarity:

economic inflation

1. “She’s negative now, she’ll be negative next month, and she’s actually been negative for the past two months.” (Siegel was referring to the core consumer price index, which excludes food and energy price volatility. He noted that it would be negative if it included current housing data rather than lagging housing data.)

2. “Inflation, as I said a month ago, is over.”

The unemployment

3. “We could really see a rapid decline in the labor market because they realize they don’t have to hoard anymore.” (Siegel would argue that employers hired redundancies during the pandemic because they were concerned about worker shortages, but as those concerns wane and productivity increases, they may cut staff.)

4. “Employment has not yet declined significantly, but I think the jobs data is likely to deteriorate significantly and rapidly.”

The interest rate policy of the Federal Reserve

5. “They would be completely wrong in the opposite direction. They were too loose before, and the money rate should have gone up a lot. Now they’re too tight.” (Siegel was warning that the Fed had overreacted to inflation and raised interest rates too far.)

6. “I think the first rate cut could happen closer to the middle of the year, and it could be quick after that because the labor market is really softening and inflation is coming down. I’m actually taking a risk that we might see two federal funds rate handles by next December. I absolutely believe Like a surprise to the upside, we may see a surprise to the downside.” (Siegel has been suggesting that the Fed could cut its benchmark interest rate from more than 4% today to less than 3% by the end of next year.)

stock outlook

7. “I think we’ve seen the decline, either in June or October. Even a moderate recession won’t cause earnings to fall enough to cause a new decline in the stock market.”

8. “When the Fed gets it — and they will next year — I think we’ve got a nice 10%, 15% rally in the stock market.”

9. “People say this is the most anticipated recession ever. When a lot of people expect something, it often causes the market to fall below its fundamental values. A lot of bad news is now factored into prices. Surprises are more likely to come to the upside from the downside.”

10. “I’ve never seen such a downtrend. This excessive downtrend means this is a good opportunity for investors.”

recession risks

11. “There is a chance of avoiding the worst of a recession — but that requires the Fed to recognize the deflationary forces I see everywhere.”

12. “We will not have a strong job market, but we may have stronger GDP and we may have stronger margins, and we may not have a recession.” (Siegel was suggesting that fewer but more productive workers could prop up economic growth and corporate profit margins against inflation, helping the United States avoid a recession.)

Read more: The godfather of the inverted yield curve explains why a popular recession indicator with a perfect track record is not accurate this time around

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