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and great to be joined as we have him every month. Uh Jeremy Seagull, Wharton ameritus professor of finance and also a
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senior economist at Wisdomree. Jeremy, great to talk to you and happy holidays, sir.
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>> You too, D. >> Great. Uh let me start out by just getting your general thoughts on the
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state of the economy as we wrap up 2025 and obviously this coming at a time where the Fed just made a a recent cut
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to rates. >> Yeah. Um, I think there's uh there's two bumps we have to get over in the next
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two months. First of all, uh uh the an expected ruling from the Supreme Court on the tariffs. Um that could churn
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things up uh depending on how it's stated and and all the rest that generates even more uncertainty. Um you
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know, I'm not a fan of tariffs. I've never been one. I I think it should it
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was not legal to begin with. Uh but nonetheless uh uh the fed uh the Supreme Court making that uh determination and
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not giving Trump time if it if they don't and I hope they do give him time to work with Congress to make it legal
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uh will turn the pot. Uh and secondly, another potential government shutdown uh January 30th.
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>> Uh we don't want that. No one wants that. And yet that is looming. There is
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still no uh you know the Dems have made healthc care a big issue. um and uh I think you're going to stick to it and uh
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there's no seemingly no progress in Congress towards moving towards a compromise on this issue. So those are
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two near-term bumps. I would say the data is starting to roll in as well. We got the jobs data a few days ago. Uh
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October was a negative. November was a positive. We've just gotten some inflation data as we're taping this uh
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right before uh the Christmas holiday. give us your thoughts on on what that data is telling us right now.
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>> Well, first of all, the the inflation data was extremely good and we're
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finally getting the the lower shelter prices which are so important um into the index and that's a major reason why
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we it came in as well as it did. And uh you know we are getting a bump from Trump tariffs but it's much more minor
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than we had feared um for a number of reasons including lower rates than we had feared would would go and and and as
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a result I I think the inflation outlook looks quite good for 2026. I think we would be between two and 2 and a half%
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which is very close to the Fed uh uh target. Let me talk about the employment data and I'll go into the Fed uh where
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it should be. um slow growth maybe slightly negative if we make a correction. You know, we're getting on
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the private side positive. We got a big negative on public because of the you know the Musk uh option of you know
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quitting in nine months and that was nine months ago and now we in October we got a big jump there. Um but the private
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sector is I would say just about producing near zero jobs. So the only increase in GDP is productivity gains at
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this uh particular juncture and I I expect it to be maybe 1 to 2% this quarter but really
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we're we're just getting some data because of the delays to actually look
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at what this quarter is going to do. But the two I think there's there's a lot of
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tailwinds next year. There's inflation I think lower than people fear which is
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going to be a positive. I also think that the tax cuts are going to be money in the pockets of a lot of consumers
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that they may not be counting on now and uh you know also in the in the hands of
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corporations that can pay for expansion uh profits and and wages. Um so I I think that once we go over these two
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bumps I think actually 2026 looks good uh in terms of the economy. How do you think that Wall Street and and equities
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and the markets will probably do? >> Yeah, you know, I've always said the Fed
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should be in the 3 to three and a half% range. We're almost there. Uh it should
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be 100 basis points below the 10 year. The 10 year is 410. So that would put Fed funds at 310 and uh so we still got
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25 to 50 basis points to go, which I think is the direction there. What about equities? Well, I really beginning to
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see more signs of rotation, real rotation, a lot of head fakes with rotation. What I mean by rotation is
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away from MAG 7 to the broader economy. Uh really uh the you know the the MAG the MAG group has had uh headwinds over
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the last two or three months. Um and um their valuations although not crazy are do not leave room for any
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disappointment. I expect that a lot of the other firms might be able to take advantage of some of the AI um
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technologies that could increase their margins and their profits. But uh you know, is that a certainty? I don't know.
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But overall, I would not be surprised to see uh gains uh on the S&P next year at
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5 to 10%. Okay, good, but much more modest than the previous three years. Is it a
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surprise that that the AI stocks have been taking kind of the hit that they have in the last few weeks?
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>> Well, not with the questions that are being asked about them over building
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potential. Data centers are costing a lot more and we've hearing signs of delay. There's always a threat of new
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chips that might really not make those data centers as as necessary. You we understand what's happening with Oracle.
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you know, it says it's going to spend 360 billion. Market does not like that.
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Um, there's always threats from China on undercutting. Uh, so and I mean, and you
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take a look at Open AI, you chat G GPT and you know, all of a sudden we got Gemini who jumps up in the number one
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place. Well, then there's competition on uh all the large language models and
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what kind of premiums can they charge. Uh so there there's a lot of things going on. Um I think the the you know
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it's it's might have surprised people that the only mag 7 that really has just
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recently put into high territory is test and it's really on self-driving. I think
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I think self-driving is the the first big thing that AI uh is going to uh is going to accomplish. It
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means millions of drivers are not going to have jobs. Um, and it's probably, you
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know, I think self-driving is going to be a a reality in five years for a majority of uh trucks and long hauls as
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well as taxis. >> What are you most watchful then about as we head into the new year?
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Well, I mean, again, there's the I'm looking at the Supreme Court and whether
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the Congress can in fact uh negotiate uh to avoid another shutdown. Uh um and then of course we we'll see the progress
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on AI. I mean, there's always that threat. There's the the AI that someone's going to, you know, remember
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what happened when DeepC came out, you know, five months ago, the Nvidia stock. I mean, I mean, is there going to be
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another surprise? Oh my god. Um because we all remember what happened in the internet when everyone wanted fiber
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optic cable and they were booming and then all of a sudden we decide we we learn how to put 10 times the amount of
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information in a single fiber optic cable and all of a sudden the demand for that collapsed. All those things can
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happen. They're good for the consumers obviously but very bad for the firms that are producing it. Um so there could
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be a lot of churn depending on you know AI developments which are really uh these technological developments seem to
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be occurring faster and faster. >> Jeremy always great to talk with you. Look forward to doing it again
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throughout the course of 2026. All the best. >> Thank you very much. >> You got it. Jeremy Seagull uh Wharton
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ameritus professor of finance and senior economist at Wisdomree.