Jeremy Siegel, Wharton professor emeritus and senior economist at WisdomTree, sees bullish momentum for markets next yr, adding that the Federal Reserve is on target for a soft landing and is predicted to make 4 more rate hikes in the following six meetings change into.
The benchmark S&P 500 index has risen greater than 23% this yr to latest all-time highs, fueled by the Federal Reserve’s aggressive rate cut in September. In the last two years, the index has almost doubled because of robust economic data and rising corporate profits.
“Over the last two years, stock market returns have been well above average: The danger is that people will think this is the new normal,” Siegel said in an interview on the eighth annual Forbes/SHOOK Top Advisor Summit at Encore At Wynn Hotel in Las Vegas on Wednesday. “I don’t see any slowdown on the horizon… The momentum is definitely there for the markets to continue into next year.” He expects the benchmark index to see a normalized increase of seven.5% to eight% in 2025 – at a Inflation of two% – will likely be recorded.
“On September 12, the Fed gave the green light that it would act aggressively if it detected weakness in the economy, significantly reducing the likelihood of a recession,” he said. The famed economist called for an additional 100 basis points of rate of interest cuts by June 2025. “Unless things go into a tailspin, we won’t see more than 25 basis points at a time,” he predicted, with the caveat that a weak labor market may lead to that Central bank should act more aggressively.
Siegel taught macroeconomics courses at Wharton University for many years and wrote a 1994 bestseller entitled Stocks in the long run. He agreed with the concept the Dow Jones Industrial Average could reach 36,000 (in 1994 the Dow was lower than 4,000). This week, Siegel identified to a room stuffed with top advisers that the cash supply has been growing at a standard rate again in recent months, and while it isn’t exactly a trend, it’s actually a promising sign for the economy, prefer it says people proceed to take out loans. “We are on track for a soft landing – the certainty that Powell will take more aggressive action if he sees economic weakness is positive.”
Despite the Fed’s short-term monetary easing cycle, Siegel predicted that long-term rates of interest won’t fall. By mid-2025, he expects the fed funds rate to succeed in 3.5% and the 10-year bond to succeed in 4.5%.
His advice? Stay invested in stocks. “Stocks are royal assets,” Siegel said. “They are the perfect inflation hedge.” Although he believes there may be a divided market and that the S&P 500 as a complete appears expensive, Siegel also identified that valuations outside of mega-cap technology stocks are far more reasonable. The Mag 7 stocks all have high hurdles to succeed in, he added: “The story and spending needs to continue, not to mention they need to monetize AI.” Regarding global stocks, Siegel noted that many major indices offer way more attractive price-earnings ratios outside the USA. “International is a value shop,” he said.
Siegel also warned investors that non-public market investments could ultimately change into a bubble. “Private equity and private credit are talked about like these undiscovered asset classes that are undervalued, but if there is a recession we will see a wave of defaults.”
Although he stays cautiously optimistic, Siegel has no illusion that the party can go on ceaselessly. “At some point there will be a bear market – there always has been throughout history,” he said. “Was it ever right to sell in a recession or bear market?” Never.”
