- Inflation came in just right in June, and it means stocks are in the “ideal environment,” Jeremy Siegel said.
- The markets guru pointed to resilience in the economy despite the Fed’s aggressive tightening efforts.
- Still, a recession isn’t completely out of the question, and stocks risk becoming overvalued, he said.
The inflation figures for June were just right – and they’ve set up the ideal environment for stock investors, according to Wharton professor Jeremy Siegel.
The top economist pointed to easing inflation, with prices rising 3% year-over-year last month, per the June Consumer Price Index report. That’s well below the 41-year-record above 9% notched last summer, and a sign that the Fed’s tightening efforts are working to cool the economy.
“We’ve got kind of a Goldilocks report,” Siegel said in an interview with Bloomberg on Thursday. “Really, the battle is won against inflation and there’s no reason to turn on the screws and risk a recession for another one or two points.”
Meanwhile, the labor market has cooled but remains relatively strong amid the Fed’s tightening efforts, with the US adding 209,000 jobs in June. That resilience doesn’t mean a no-recession scenario is guaranteed, Siegel suggested, though other experts have said the strong data signals a growing likelihood of a soft-landing, which is a positive for equities.
“The real economy is really hanging in there, which is remarkable. It’s the ideal environment for stocks,” Siegel added.
Stocks popped 2% this week, as investors expect the Fed to soon pause or dial back interest rates after the release of the June inflation report. Central bankers have raised rates from zero to over 5% since March of last year, a move that led the S&P 500 to shed 20% in 2022.
Previously, Siegel said he saw investor FOMO fueling stocks over the short-term, though a shallow recession could end the rally.
