Why Jeremy Siegel Is Cautious on Markets

Wharton economist Jeremy Siegel continues to be guarded about the financial markets, citing tightening lending conditions, recession concerns and potential ongoing banking stress.

“I remain cautious on the markets,” the Wharton emeritus finance professor said in his weekly column for WisdomTree, where he is senior investment strategy advisor.

“Value stocks are also taking hits from fears of further fallout from the regional banking failures,” he wrote. “I think tightening lending restrictions will further crimp the economy. The market is positioning for a mild recession and certainly there is risk it could deteriorate further until the Fed really pivots towards cutting rates.”

Among other points, Siegel noted that last week’s two inflation reports, the Consumer Price Index and Producer Price Index, both came in “quite tame,” at or below expectations. The market was likely positioned defensively for hotter inflation, which explains the positive reaction, he said. Data for May may turn out even better, Siegel wrote.

“What raised my eyebrows last week was jobless claims, which broke out higher and 20,000 job losses over expectation and the highest in well over a year,” he wrote, noting jobless claims are the economy’s earliest real indicator.