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Inflation arrived just in June, and that means equities are in “the perfect environment,” Jeremy Siegel said.
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The market guru pointed to the economy’s resilience despite the Fed’s aggressive tightening efforts.
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Still, a recession isn’t completely out of the question and stocks risk becoming overvalued, he said.
Inflation numbers for June were spot on — and they created the perfect environment for stock market investors, according to Wharton professor Jeremy Siegel.
The top economist pointed to falling inflation, with prices rising 3% year-on-year last month, according to the June Consumer Price Index report. That’s well below the 41-year high above 9% reached last summer, and a sign that the Fed’s tightening efforts are helping to cool the economy.
“We have a sort of Goldilocks report,” Siegel said in an interview with Bloomberg on Thursday. “Really, the battle is won against inflation and there is no reason to turn the screw and risk a recession for another point or two.”
Meanwhile, the labor market has cooled but remains relatively strong despite Fed tightening efforts, with the US adding 209,000 jobs in June. That resilience doesn’t mean a recession-free scenario is guaranteed, Siegel suggested, though other experts said the strong data signaled a growing likelihood of a soft landing, which is positive for stocks.
“The real economy is really latching onto it, which is remarkable. It’s the perfect environment for equities,” Siegel added.
Stocks jumped 2% this week as investors expected the Fed to suspend or raise interest rates soon after the release of the June inflation report. Central bankers have raised rates from zero to over 5% since March last year, a move that has seen the S&P 500 fall 20% in 2022.
Previously, Siegel said he saw investor FOMO fuel stocks in the near term, although a shallow recession could end the recovery.
Read the original article on Business Insider