Jeremy Siegel: Look for Positive Market Surprises in 2023

Wharton School economist Jeremy Siegel has taken a more bullish view on the economy and corporate profits for 2023 than many of his peers and recently suggested the Federal Reserve may slow its rate hiking earlier than many expect.

“I’ve never seen so much bearishness. There’s never been a time when, what, 60% of economists forecast a recession. And when everyone’s on one side I get very wary,” he said on CNBC last Friday, adding that the market may be in for some surprises in 2023.

“2022 was marked by very good job growth and very poor GDP growth and very poor productivity growth. Firms were hoarding workers because they were worried they couldn’t get them. We may see the opposite (in 2023),” Siegel said on “Closing Bell: Overtime.”

Rebounding productivity would put downward pressure on prices and upward pressure on margins, he noted.

“Everyone who says, ‘Oh my goodness, these 2023 (earnings) estimates are way too high,’ might be surprised that many of them might turn out to be what profits are going to be,” the professor emeritus added.

“We might see actually the job market loosen up dramatically, even job losses,” while GDP “grows much faster than most people think. And we have a chance, if the Fed pivots, to really avoid a recession and have a good year for profits,” Siegel said.

The government’s December jobs report, to be released Friday, may offer a clue to where the Fed and the economy are headed this year, he indicated, noting economists expect a gain of about 200,000 jobs. That would be a smaller gain than reported for November.

If the labor market loosens and unemployment rises, Siegel said, “you’re going to get a different tone from the Fed.” High employment “is the last reason that they have to stay as tight as they are. That message is going to get through,” he added.