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And as always, great to speak every month with Wharton Emeritus Professor of Finance, uh Jeremy Siegel, who is also a
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uh senior analyst at WisdomTree. Jeremy, great to have you back with us this month. Thank you, sir.
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Happy to be with you, Dan. Obviously, a lot going on when you're talking about the impact of the war in
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Iran, but also uh we had a Fed meeting uh last before we talked to you last, and I
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guess let's start there with the decision of no rate cuts. Give us your thoughts.
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Yeah. The I actually let me start with Iran because 2 hours ago is Yeah. I mean, uh
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I know that takes a couple days lag here, but uh 2 hours ago we did have a announcement of a you know, a 5-day
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postponement that rallied the markets dramatically by Trump. Uh now, Iran has denied that
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there was such contact, but uh the markets like the fact this is the first de-escalation.
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Uh you know, of the war on one part. Um it is a lot of confusion and and a lot of hope. So, this was going to be Monday
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an extremely tense day, very tense, and um uh we'll see how it unfolds. Um uh
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you know, Iran is by far the most important um uh determinant of of all market directions,
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uh not just oil, but equities, bonds, Fed action, and all the rest. Um let's
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go to Fed action. Um uh Uh it was no one's surprise um uh that uh uh there was no change. Um I I'll tell you
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what somewhat surprised me, and this has uh somewhat longer-term consequences, but
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um that uh Fed Chair Jay Powell was very adamant that he will not leave the Fed until he's cleared of all
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uh charges of impropriety uh that have been leveled by the Trump administration. Now, let me explain that
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that doesn't mean he he will stay as chair. Um um uh it it might be that the the
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Senate will still confirm Warsh as chair, but as we know, uh Powell has 2 more years left, and there's no way
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that Trump can remove him. Um uh you know, uh so basically, uh he's saying, you know, if you want me out, um
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>> [laughter] >> end the end this thing. Yeah yeah that that So, that's
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significant. Now, I'll tell you why it's significant, because if if Powell stays on, even if Warsh
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becomes chair, I mean, you know, he uh Powell have an influential voice as ex-chair.
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Right. Can sway a number of people, and um I I expect there to be some very close votes uh coming up in June when
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Warsh takes uh the reins about whether to cut rates or not. Now, everything depends on what happens in Iran, if oil
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goes back or not, and etc. etc. and so on. So, you know, I mean, uh you know, there's there's many months to go, but
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um it's a very interesting position. Um let me also say something that I uh is I
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thought was very significant, the long-term real growth rate in the US, um which is predicted by the Fed
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officials, the 19 FOMC members, was raised by the most in its history by two um 20 basis points, 2/10 of a percent, from
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1.8 to 2 percentage points. In other words, what they think the long-term real GDP growth is. That has never
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happened before. It's the biggest increase in a 3-month period. Why does that matter? It
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I think that confirms their belief that AI is in fact productive and will raise the growth
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rate in the United States. Um there's very there's you know, very little else that happened
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in the last 3 months that could explain for that big an increase. And by the way, um I won't we won't go into it
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unless you want to, but an AI increase in real GDP growth is extremely uh um important for the long-term fiscal
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viability of the deficit and and government spending. But uh So, this is >> me change.
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Let me play Let me play off of that, because we've also in recent months seen
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more and more companies making job cuts, seemingly linked to their path around AI, and it brings up the question I
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think a lot of people would ask, and I've talked to a lot of labor economists
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about it, and I'll ask you from from your side of it, uh you're seeing good
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the expectation of this growth is there, but you also have this concern about the
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labor force as well. So, how do those two kind of balance out as we move forward? Well, it's kind of interesting,
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because you know, we've gotten some layoff what what you know, when you look at the
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actual data, we don't see unemployment claims go up. Uh they're very uh we
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don't see uh the the weekly ADP numbers that talk about the payroll. Yes, the
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payroll was very weak um um in February, but it really offset unusual strength in January, and and
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um uh really the equilibrium demand is zero, but the equilibrium supply is is zero. So, that's why the unemployment
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rate is remaining the same. Uh Challenger layoffs, I think we're actually down.
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Um job openings actually, I think edged up. Um yeah, we get Block, you know, laying
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off 20,000. Uh they attribute I don't know if they attribute AI or not. Many
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people who studied Block said they had hired way too many people anyways, and then it really wasn't related to to that
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at all. So, you know, you hear a lot of anecdotal stories, but you don't you don't get any hard
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evidence on the macro level that it's costing jobs. And and one has to understand, and I've written about
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this, AI increases in you know, will increase wages and income, um and um it it ultimately will produce a lot of
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demand from the extra income and productivity that it brings that will bring a lot of white even white-collar
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workers demand will remain stable. So, I I think they the whole story of the AI labor apocalypse is wrong. Yeah. Um and
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um uh the so Citrini report, which uh sparked the panic on Wall Street a month ago, um was cleverly written, but from a
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macro standpoint, in my opinion, um completely unfounded. Okay. Uh let me finish up going back to kind of a
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byproduct of the war, because we've seen the markets pull back a little bit,
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obviously with what has been going on. Uh I think the expectation is if there's
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some sort of agreement reached, we will see the markets move higher. Generally, what is your thought about where the
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markets are right now, and how should investors be thinking about what we're
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kind of seeing play out now, and I think the expectation has to be that at some point, we're going to see some sort of
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balance come out from what we're seeing with Iran, and that the markets will get
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back on the path we saw before this uh this war started. Yeah, that I agree. Uh absolutely. I mean, again, I don't know.
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I mean, uh but let me say that the Iran situation is if if it isn't solved, if the Hormuz stays
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uh closed, um and uh the the the the productive talks that Trump talked about are were not so,
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um that's going to lead to further downside. Um there it there's just a global impact here. We are impacted much
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less, but Asia is very impacted, and that impacts Now, I've I've been talking
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to firms that for instance, they're using uh remote workers in Philippines. They're having blackouts in the
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Philippines. They're the energy situation there is so bad that there's rationing, and then they can't get their
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work out there. It it it it will be a serious effect. On the other hand, if we get that that oil moving again,
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um there's no reason that the bull market will not continue. Let me finish up actually with one other thing,
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because we've talked so much about oil through the Strait of Hormuz. The other
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component that's very interesting is fertilizer, and how that can potentially
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have an impact on the farming sector in so many different locations. Yeah, I heard that urea, which is one of the
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main elements of that, that almost 50% goes through Hormuz, or I heard you know, that was one report, and
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absolutely, yes, the fallout effects of not only uh um oil itself, oil derivatives,
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fertilizer, um I mean, it is it is incredible that a little strait could hold the world
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hostage. Um you know, Iran does not own that strait. Oh, some people say, "Oh, we're
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going through Iran." No, it isn't. International law, they own 3 miles out.
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There's still 20 miles of passage that's international waters. Um and um you know,
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uh them blocking it or charging a toll as they suggested, etc. etc. really violates international law, and will not
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be tolerated. So, again, let's hope some sort of deal is there. We all want that.
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Um >> But uh I I do think what we saw is uh uh uh the first verbal on either side
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de-escalation. I mean, which I think is hopeful and um uh uh let's um let's hope that that is in fact uh going
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to prevail. Jeremy, I appreciate your time today. All the best. Thank you, sir. Thank you, Dan.
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You got it. Jeremy Siegel, uh Wharton Emeritus Professor of Finance, as we mentioned, also with WisdomTree.