According to his interaction with CNBC's 'Squawk Box, Jeremy Siegel, professor of finance at the University of Pennsylvania's Wharton School, said 90% of the inflation had already gone and that there would be a massive surge in equities when the Federal Reserve gets it.
What happened to the Fed: It took too long for them to get it and they haven't got it yet. Inflation is basically over, but they will. You are going to see a huge increase in equity prices as soon as they are going to get it, Siegel told CNBC.
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Wall Street has started to take the Fed talk into account as major indices lost steam over the last few days and fears of fresh COVID- 19 cases coming from China have started to weigh in. The SPDR S&P 500ETF Trust SPY ended Nov. 21, 2022, a session 0.36% lower, while the Vanguard Total Bond Market Index Fund ETF BND ended flat.
Siegel pointed out that the Case-Shiller monthly housing index and the Federal index, which was due to be released the following week, were expected to show a big decline. The government computes it, and it's a very important part of the index, it's so lagged that it will continue to show increases. He said that the Fed will say that things are all declining on the ground and that we have to think about that.
Siegel said he was shocked when St. Louis Fed President Jim Bullard said Fed rate hikes to date haven't been big enough to cut inflation.
I wonder what kind of data he is looking at. We are going to get the monthly money supply tomorrow. Since World War 2, we have had a greatest six month decline in money supply. He said that monetary conditions are still extraordinarily tight.
He said that commodity costs are not going up any more because of Passing Costs: Talking about housing.
This housing is for the core index, and for the core index it is over forty per cent. Many of them have passed on the costs but now the commodity costs are not going up any more, even when you take into account passing on, and I think it is true. There are some labour costs that are going up. He said that 90% of our inflation has gone.