Page 47 - Investment Advisor September 2022

Conclusions

PORTFOLIO & ETF PERSPECTIVES
By Dinah Wisenberg Brin

“The Fed has got to be looking at the
sensitive commodities and housing pric-
es and say[ing], ‘You know what? Yeah,
we messed up later on and caused a lot of
inflation but forward-looking inflation
has really been stopped,’” Siegel said.
A lot of inflation that has been in the
pipeline is coming through in the official
statistics, “but forward-looking inflation
is really nil on a real basis,” he explained.
“And the Fed should really slow down
the rate of hiking, and if we get a snap-
back in productivity that’ll put further
downward pressure.”
As for the market, “I’m not going to
guarantee we saw the bottom a cou-
ple of months ago … but earnings have
Jeremy Siegel: Time for Fed really held up,” the professor stated.
With more than half the S&P companies
to Slow Rate Hikes having reported, it’s “not as big a beat
as last year, of course, but that was an
The Wharton economist also says he is puzzled all-time record.”
Guidance is a little bit lower “but I
by why U.S. gross domestic production fell as the look at the S&P estimate for just this
economy added 2.7 million jobs. year, so I’m not talking about 2023, it’s
not any different from January, really,
even with all that’s happened.”
he Federal Reserve should end been up 10% to 12% if housing pric-
its tightening activity soon as for- es had been factored in properly; now, WHY THE GDP DROP?
Tward-looking inflation appears housing experts and data suggest that Siegel is puzzled by the drop in gross
to be under control, Jeremy Siegel, housing inflation has come to an end, domestic production when the U.S.
finance professor at the University of he said. economy added 2.7 million jobs in the
Pennsylvania’s Wharton School, sug- “The Fed should be near the end of first half of this year. “How did we get a
gested in a recent CNBC appearance. its tightening cycle. We’re already in drop in GDP? I don’t know why people
Fed officials need to look at more (an) above-neutral mode. I know a lot of aren’t asking that question,” he said.
than the Consumer Price Index to gauge people think not … Well, the neutral rate You get GDP by people working, so
inflation, as the CPI is backward-look- is somewhere between one, one-and-a- the logical explanation would be “a tre-
ing and understates housing prices, he half, we’re over 2 (percent) right now,” mendous drop in hours. Well, the offi-
told the cable network, adding that the Siegel explained. (The Fed has described cial drop in hours doesn’t explain it. Or
market wants the central bank to look at the neutral rate as a theoretical federal a dramatic drop in productivity,” he said.
forward-looking data. funds rate at which its monetary policy The first quarter brought the worst
CPI over the past year would have involves neither tightening nor easing.) productivity in 75 years. But it bounced

SEPTEMBER 2022 INVESTMENT ADVISOR 43