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