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