Wharton on the Economy this Year

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What’s Ahead for the U.S. Economy in 2022

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Wharton’s Jeremy Siegel speaks with Wharton Business Daily on SiriusXM about what’s ahead for the U.S. economy and the stock market in 2022.

Podcast Audio at link ...

The Federal Reserve must get “more aggressive” in 2022 by increasing interest rates and tapering down asset purchases in order to tame inflation, according to Wharton finance professor Jeremy Siegel. “The Fed is way behind the curve … and should have started raising interest rates by now,” he said on the Wharton Business Daily show on SiriusXM as he forecast market and economic trends for 2022. (Listen to the full podcast above.)

Siegel predicted the Dow and the S&P 500 will continue to climb in the year ahead, albeit at a slower pace than in 2021. The stock markets will face some headwinds when the Fed raises rates, but “stocks are real assets, and you want to hold real assets when there is inflation,” he said. His biggest concern is about containing the double-digit growth in money supply, which he said is not consistent with inflation at rates of even 2% or 3%. But with inflation edging towards 6%, he expected pressure on wage growth and resulting repercussions in the labor markets.

Following is an edited version of his interview.

Wharton Business Daily: Give us your overview on how you thought 2021 was from a market perspective.

Jeremy Siegel: Early on in 2021, I saw the burst of the money supply that was produced by the Federal Reserve, and that really clued me in on what was going to happen. I had never seen such a strong provision of liquidity, and I knew it would first go into the markets because spending was repressed. But I had predicted that we were going to have substantial inflation in 2021, and so what has happened has not surprised me.

Wharton Business Daily: Are we past the point where we consider the rise in inflation to be transitory?

Siegel: Absolutely. It was never transitory in the sense that it’s only going to be a few months. In fact, I have been saying for over six months that I think the cumulative amount of inflation that we’re going to have over the next three or four years will be 20% to 25%. Now, I don’t mean that in one year. It’s impossible to know how it’s going to exactly be distributed. But when we come out of this, the price level of goods and services will be about 25% higher.  .... '