U.S. stock market bulls and Wharton School finance professor Jeremy Siegel said on Tuesday (16th) that U.S. stocks have bottomed out and the prospects for the second half of the year are promising, but if the U.S. Federal Reserve (Fed) raises interest rates to 4% or higher, US stocks are likely to fall once more.
Siegel said the Fed may raise interest rates by another 4 yards (100 basis points), and the next order is expected to be 2 yards, 1 yards, 1 yards. He pointed out that the Fed does need to raise interest rates once more, not to stop now, but if the Fed is more aggressive, raising interest rates by 4 yards, 2 yards, 2 yards, so that interest rates rise to 4%, 4.5% or 5%, I am afraid you will regret it.
Siegel also said that wages are indeed rising in some industries in the economy, but the main force driving inflation in the past two years, house prices are falling, and commodity prices have stopped rising. “I think if the Fed sees this, it knows it doesn’t have to act more aggressively. I think the stock market bottomed out in June, and the second half of the year has been good,” Siegel said.
Now that the money supply is slowing at a record pace, Siegel said there is a possibility of a soft landing in the U.S., an uncertain thing, but he is increasingly optimistic.
With the Fed leaning toward continuing to raise interest rates, the economy is flooded with mixed signals, with rapidly rising employment, falling gasoline prices, soaring housing and food costs, subdued consumer confidence and steady consumer spending data. Against this backdrop, the Fed is trying to strike a balance.
Goldman Sachs economists have said that while several factors beyond the Fed’s control might complicate a soft landing and reduce the chances of success, a soft landing remains a viable but difficult path.