Economic Outlook and Market Resilience with Jeremy Siegel

Jeremy Siegel, Wharton professor and WisdomTree chief economist, discusses economic growth, inflation, interest rates, and market resilience. He addresses the impact of tariffs, AI rise, and uncertain Fed leadership. Siegel remains optimistic about market resilience despite potential headwinds.

Jeremy Siegel, Wharton professor and WisdomTree chief economist, recently shared his insights on economic growth, inflation, interest rates, and market resilience. In a recent commentary, Siegel noted that while there was not much new economic news, the data that came in continued to show underlying resilience in the economy. He estimated that third-quarter GDP is expected to be north of 3%, with the Atlanta Fed's forecast at over 5%, but Siegel believes this is too optimistic.

Supporting this strength is a rebound in productivity after a poor showing in 2022. Despite a slight decrease in hires, there are no signs of negative payroll reports. Strong economic data is keeping 10-year bond yields elevated, with yields almost reaching 2% before settling closer to 1.9%. Siegel attributes this to the inflationary surge and fears of future inflation, making bonds less of a perfect hedge asset.

Siegel expects higher rates to be with us for some time, but he does not think the Fed should raise interest rates further from here. He believes it is highly unlikely for the Fed to increase rates in September, and while the markets have priced in some probability of a November hike, he does not think the Fed needs to make that move. Upcoming CPI and PPI reports are expected to show higher inflation, particularly in oil and energy prices, but core inflation is expected to look better.

Siegel also highlighted the risks associated with continued rate hikes, such as potential downturns in bank lending, consumer spending, and commercial lending. However, he believes these risks have been contained, and the economic data remains robust. Jobless claims last week were subdued, further illustrating the health of the economy.

One notable development is the resolution of a puzzle regarding the widening gap between GDP and GDI. This gap has been explained by including interest payments by the Federal Reserve to banks on their deposits in GDI, which were not historically counted in GDP. This explanation helps clarify the economic picture.

For equities, Siegel sees an upward tilt for the remainder of the year. He notes that while there was softness in large stocks like Apple due to headlines about China's restrictions on state workers using iPhones, he believes this was an over-reaction. Siegel remains optimistic about market resilience despite potential headwinds.

In a separate episode, Siegel discussed the impact of tariffs, AI, and the uncertain future of Federal Reserve leadership. He highlighted how markets are reacting to global instability and the possibility of renewed tariffs. Siegel also noted that AI could potentially help offset economic challenges, but he remains cautious about its impact on the workforce.

Overall, Siegel's outlook is cautiously optimistic, with a focus on the underlying resilience of the economy and the potential for market growth despite potential headwinds.

References:
[1] https://resources.wisdomtree.com/weekly-siegel-commentary/
[2] https://shows.acast.com/wbr-highlights/episodes/jeremy-siegel-on-inflation-fed-policy-and-market-resilience
[3] https://www.cnbc.com/2025/07/25/ai-probably-wont-replace-you-just-yet-wharton-professor-says.html