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The brand new bull market in shares has extra room to run, high economist Jeremy Siegel stated.
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Siegel pointed to robust momentum, with the S&P 500 up 16% from January.
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Nonetheless, he warned of draw back dangers within the second half of the yr, with the US dealing with a possible recession.
The brand new bull market in shares has room to run, at the same time as central bankers wage what Wharton professor Jeremy Siegel describes as a “warfare on progress.”
The economist pointed to robust current efficiency in shares via the primary half of 2023, with mega-cap tech companies hovering amid the hype for AI and bets that the Federal Reserve will quickly pull again on rates of interest. That helped propel the S&P 500 to a acquire of 16% within the first six months of 2023 – already beating Siegel’s unique estimate that the benchmark index would rise 15% by the tip of 2023.
“It may possibly proceed rather a lot longer … the momentum remains to be there,” Siegel stated in an interview with CNBC on Monday, including that he believed markets would wish to see disappointing financial information or a drop in company earnings for the rally to be thrown off monitor.
Even when the uptrend in shares is disrupted, the rally might doubtless sustain, Siegel stated, due to traders keen to leap into the subsequent bull market after 2022’s dismal efficiency.
Nonetheless, dangers for the market lie forward, particularly because the Fed dangers overtightening the economic system with ultra-restrictive financial coverage, Siegel stated.
Siegel has been a vocal critic of the Fed during the last yr, as central bankers aggressively raised rates of interest 1,700% to decrease inflation. That dangers tipping the economic system into one other recession, Siegel stated, although inflation indicators reviewed on the Fed’s final coverage assembly have clocked in at or under expectations.
Nonetheless, Fed officers have recommended charges might keep elevated all yr, with markets at the moment pricing in an 86% probability the central financial institution will increase charges one other 25 basis-points at their subsequent coverage assembly, per the CME FedWatch software.
“It is like a warfare on progress,” Siegel stated of Fed coverage.
Meaning shares face extra draw back dangers within the second-half of the yr, he added, although he believed the rally might proceed to run over the short-term.
The Wharton professor of finance has modified his view on the economic system and markets quite a few occasions over the previous yr, predicting a brand new bull market in January earlier than warning that the rally in shares might fall off in June. That is as a result of the US might face a gentle recession, Siegel warned, which he believes might hit the economic system inside the subsequent few months.
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