Jeremy Siegel: Time for Fed to Slow Rate Hikes

As for the market, “I’m not going to guarantee we saw the bottom a couple of months ago … but earnings have really held up,” the professor said. With more than half the S&P companies having reported, it’s “not as big a beat as last year, of course, but that was an all-time record.”

Guidance is a little bit lower “but I look at the S&P estimate for just this year, so I’m not talking about 2023, it’s not any different from January, really, even with all that’s happened.” 

Why the GDP Drop?

Siegel said he’s puzzled by the drop in GDP when the U.S. economy added 2.7 million jobs in the first half of this year.

“How did we get a drop in GDP? I don’t know why people aren’t asking that question,” he said. You get GDP by people working, so the logical explanation would be “a tremendous drop in hours. Well the official drop in hours doesn’t explain it. Or a dramatic drop in productivity,” he said.

The first quarter brought the worst productivity in 75 years. But it bounced back 75 years ago, Siegel noted. “Now the government is telling us with recent data that the second quarter … is almost as bad as the first quarter. This is unprecedented. We have never seen a collapse of productivity like that in history,” Siegel said. The possible good news is that a bounce-back to a more normal level would slow inflation, “because obviously less productivity equals more inflation, high productivity less inflation,” he said.

Siegel wondered how to understand the GDP drop while the economy added 2.7 million jobs. “You have to try to figure some of this data out before you make rash moves on the monetary front,” he said.