Wharton’s Siegel: ‘Caution Is Going to Be the Word Here’ for Investors

whartons siegel caution is going to be the word here for investors
Wharton's Siegel: 'Caution Is Going to Be the Word Here' for Investors

Wharton School finance professor Jeremy Siegel warns savvy investors to tread carefully among trade-war fears and a volatile stock market.

Siegel literally cited a world of risks facing investors today, from rising rates to trade tensions and almost daily unexpected surprises, such as Italy’s financial and political turmoil.

“The major threat of the market is higher interest rates going forward. Too many people read the FOMC minutes as being too dovish,” he recently told CNBC.

Siegel expects the Federal Reserve to hike rates a total of four times this year, a number Wall Street may be dangerously underestimating, CNBC.com explained, noting that as rates rise, stocks historically look less appealing to investors.

Siegel also warned that mounting trade tensions with China is yet another “wild card” for investors.

“[President Donald Trump] feels he has to tread very, very carefully on this. It doesn’t mean for sure he won’t go full blast forward,” Siegel said. “Caution is going to be the word here,” he said.

“This is a great year for earnings, no one argues with that. But the tax cut is front-loaded which means that the write-offs on capital equipment are going to accrue to 2018 and not nearly as much in 2019,” Siegel said.

For its part, the Fed said that U.S. factories ramped up production in late April and early May despite the risk of a global trade war, but soft consumer spending kept the economy growing at a moderate rate.

In its periodic “Beige Book” summary of contacts with businesses in its 12 regional districts, the U.S. central bank pointed to strong output in fabricated metals, heavy machinery and electronics equipment.

The assessment of growth across the economy represented a slight upgrade from the Fed’s prior Beige Book report, which said economic activity was expanding at a “modest to moderate pace.”

“Manufacturing shifted into higher gear,” the Fed said in its latest report.

More than half of the Fed’s districts reported a pickup in industrial activity, and a third of them reported the activity as “strong.”

(Newsmax wire services contributed to this report).

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