A look into the crystal ball suggests we will see a strong economy, continued rising inflation and higher taxes over the next several months, according to Jeremy Siegel, senior investment strategy advisor at WisdomTree and professor of finance at the Wharton School of the University of Pennsylvania.
In a keynote address on Wednesday, the second day of the Orion Ascent conference in Scottsdale, Arizona, Siegel shared his thoughts on the state of the markets and the economy. He also showed how today's market and economic environment fits into a longer-view historic context, provided observations on global equity valuation, and discussed the impact of the COVID-19 pandemic on stock and bond returns and future inflation.
Here are the top 10 predictions he made for the economy at the annual conference, whose sessions were also presented virtually:
1. The economy will be strong despite rising inflation.
The enormous stimulus provided by the Federal Reserve and government policies under Presidents Donald Trump and Joe Biden will result in a strong economy but higher inflation, Siegel told attendees.
Although the prices of everything from housing to restaurant meals have risen, many consumers continue to spend because they have the money, he said. After all, "the government put $5 trillion into the hands of people that they didn't have before," he noted.
But "nothing is free," Siegel stressed. The inflation we are seeing is "not temporary" and will be "probably one of the major political issues in 2022," he predicted.
The current market "hesitation" created by the COVID-19 delta variant, meanwhile, will fade and spur the economy, he predicted.
2. Prices may rise 20% over the next few years.
As the average prices of goods and services continue to rise, we may see the price level increase 20% or more over the next three to four years, with an increase of about 5%-6% each year, he predicted.
