Jeremy Siegel: More Room for Bull Market

“The Goldilocks scenario for the economy and markets continued to play out nicely in Friday’s labor market report,” he wrote, referencing the situation in which the economy would experience declining inflation while avoiding a recession.

“Friday’s data came in strong, with a slight upward revision to the previous two months of payroll reports. The unemployment rate dropped to 3.8%, backing right into a sweet spot for unemployment between 3.6%- 4%,” Siegel wrote.

“I was also happy to see the average hours worked bounced up to 34.4, which is a positive sign. We’re back up to the 24-year average after a dip earlier this year. There was also a slight tick up in the participation rate, which is very good for labor market slack and wage pressure concerns.”

Unemployment claims rose to the exact middle of Siegel’s desired range of 200,000 to 240,000, he noted. “So, both the unemployment rate and jobless claims moved to the center of our sweet spots — not too hot or cold.”

Consumer Price Index inflation data for March, to be released Wednesday, will provide important information for assessing potential Federal Reserve action on interest rates, Siegel suggested.

The economist said he considers the shelter component of inflation to be overstated by the Bureau of Labor Statistics, and it represents two-thirds of the increase in the CPI year over year.

“The early call is for year-over-year core CPI (which excludes food and energy prices) to decelerate to 3.7%, which would be the lowest level since the COVID-19 pandemic began. A lower reading, which is very possible, will bring a nice equity rally,” he wrote.

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