Wharton economics professor Jeremy Siegel says the stock market is poised to bounce back in 2023. The renowned economist has recently been a vocal critic of the Federal Reserve and its chairman Jerome Powell. However, despite signs of slowing inflation, the Fed is expected to continue interest rate hikes in December and again in January. With that said, will the stock market bounce back in 2023? Despite some detractors, Siegel maintains a positive outlook.
Wharton professor Jeremy Siegel expects the stock market to bounce back in 2023.
Siegel told CNBC he believes “basically, 90% of our inflation is gone” and that the Fed uses outdated metrics. “It’s taken way too long for the Fed to get it, and they haven’t gotten it yet,” he said. Siegel expects the Fed to end rate hikes in early 2023, which could spark a massive market rally. Additionally, he believes the market could jump as much as 30% over the next two years.
The Federal Reserve uses the consumer price index (CPI) as its primary metric, which notoriously lags behind other data sets. Siegel noted falling housing and rental prices as an indicator that inflation is easing.
Not everyone agrees with Siegel’s optimism.
Bill Ackman, billionaire investor and CEO of Pershing Square Capital Management, vehemently disagrees with Siegel’s take on the economy. He says high inflation is here to stay, and the Fed has little recourse. “We think inflation is going to be structurally higher going forward than it has been historically,” Ackman said. “We do not believe that it’s likely the Federal Reserve [will] get inflation back to [2%].”
Ackman cites structural shifts in the global economy, such as the transition to clean energy, for continued elevated inflation levels. Additionally, “re-shoring” (companies bringing internal business operations back to US shores) means higher labor costs, which could also increase inflation.
The Federal Reserve will meet one last time in 2022 on December 12 and 13. All signs point to the Fed slowing rate hikes, with only a .5 percent point interest increase expected. Though there is some positive economic outlook for the coming year, Powell says we’re not out of the water yet.
“I will simply say that we have more ground to cover,” he said. “History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.”
