According to Wharton professor Jeremy Siegel, the Federal Reserve is unlikely to raise interest rates to extreme levels because of cooling inflation.
The Fed could be nearing an end to its outsized interest rate hikes because inflation isn't rising as fast as it used to, according to Siegel.
Siegel said that the market expects another 75 basis points in rate hikes by the end of the year, which would likely necessitate a 50-basis-point rate hike
"I think that should definitely do it because on the ground I don't see prices going up anywhere near the rate it did in the past," Siegel said, adding that home prices are actually falling.
The market is set up for positive surprises going forward due to investor sentiment being very pessimistic.
Everyone that wants to leave the market is out and everyone that wants to be tactical is short. Siegel said that the surprises would be to the upside.
According to Siegel, there are a lot of potential surprise catalysts that could send the stock market soaring. A falling dollar, a resolution to the Russia-Ukraine war, and better-than-feared economic results from Europe are some of the possible surprises.
This may mean some sort of settlement going forward as the developments in Ukraine move quickly. Siegel said it looks like Europe has prepared better than we had feared for the winter.
The rebound in economic productivity in the second half of the year would be good news for the Fed. The Fed doesn't have to go to extreme if we get a rebound in productivity in the second half of the year.
Siegel believes that the mid-June lows are the lows for the current bear market cycle and that investors should be prepared for head fakes as stocks enter a basing period.
Millions of pieces of news are available. We take from the negative pile when the market goes down and the positive pile when the market goes up. The buyers are the only ones left when everyone has sold.
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