Longtime U.S. stock bull and Wharton finance professor Jeremy Siegel said U.S. stocks could soar 20% in the first half of 2023 as the Federal Reserve ends its aggressive rate hikes next year and shifts its focus to supporting economic growth. .
Siegel said he thinks the stock market should have a very good year, with U.S. stocks on track for gains of 15% to 20%. While most don’t expect these to rise until at least the second half of the year, he thinks it will happen in the first half.
Siegel said that while the Fed plans to continue raising rates and keep them high for some time, he believes the Fed will wake up to economic realities and start cutting rates next year to support growth.
The Fed has raised interest rates this year from near zero in March to more than 4% now, and has signaled it will reach more than 5% next year, with the goal of lowering inflation. In June this year, US inflation reached a 40-year high of 9.1%, and remained above 7% in November, well above the Fed’s target of 2%.
In fact, the Fed’s recent interest rate hikes have caused the S&P 500 to drop 20%, while the tech-heavy Nasdaq has fallen 34% this year.
Siegel has previously repeatedly criticized the Fed for insisting on raising interest rates. He believes that the Fed is making one of the biggest mistakes in its 110-year history, which may lead to a severe recession. He worries about the risk of Fed policy raising interest rates too much. If Fed Chairman Powell sticks to his goal of falling to 2% in the official data, he will inevitably tighten monetary policy too much, committing restrictions on liquidity in 2021 and early 2022. The same mistake of being too slow sexually.
Siegel also said: “They really need to stop and see, what is actually going to happen. That will really trigger a big rebound. We have seen good signs of inflation, and I think most of the interest rate increases have passed.”