All Signs Point to a Resilient Economy

Jeremy Siegel

January 22, 2024

Jeremy J. Siegel, WisdomTree’s Senior Investment Strategy Advisor, is the Russell E. Palmer Professor Emeritus of Finance at The Wharton School of the University of Pennsylvania. Professor Siegel has written and lectured extensively about the economy and financial markets and is a regular contributor to the financial news media. In 1994, he received the highest teaching rating in a ranking of business school professors conducted by BusinessWeek magazine. His book, Stocks for the Long Run, was named by The Washington Post as one of the 10 best investment books of all time. His latest book, The Future for Investors, is a bestseller.

The S&P 500 reached a new all-time high on Friday as the economy continues to show strength with our favorite high frequency weekly jobless claims indicator falling under 200,000—which is nearly a 60-year low in that series. That is clearly indicative of strength in the economy.

There was some weakness in the manufacturing surveys, particularly the Empire State Manufacturing Survey. These surveys are referred to as ‘soft data’ and they reflect the sentiment of the survey respondents. But the hard data has been coming in strong. Housing data was good and retail sales came in ahead of expectations. All signs point to a resilient economy with over 2% gross domestic product (GDP) growth in the fourth quarter of 2023 and good momentum continuing in January 2024. Furthermore, there was a sharp increase in consumer confidence in the University of Michigan Consumer Sentiment Survey, certainly another good sign for the economy.

Interest rates started moving higher with these strong economic data points—particularly the 10-year rate. With these recent strong datapoints, commentary from Fed members has indicated push back as to whether the first rate cut should occur in March.

Just to reiterate my position on the Fed. I do not think we need five to six cuts from the Fed to have continued equity market gains this year. The Dot Plot penciled in three rate cuts—but the key insight I took from Powell’s December discussion was the willingness by the Fed to cut rates if the economy weakens. I previously was concerned the Fed might be stubborn in its inflation fight even in a softer economic scenario. Now we see the Fed weighing the employment side of its mandate as much as the inflationary side. And that’s the key flexibility we need to lower downside risks. If the economy is strong and the Fed does not cut rates as much as some expect—earnings growth may end up being supportive for the market.

Higher duration growth stocks (those with higher valuation multiples based on future cash flows)—have held up very well in the face of these higher interest rates relative to the value stocks. This is not usually the case, but I am attributing this strength to the continued strong performance in the semiconductor companies, which are spreading excitement over the impact from artificial intelligence (AI) technology. For the full year, I still expect greater participation in the rally from a broader cross section of the market, but sentiment still favors the high quality, big tech stocks.


Artificial intelligence (AI): A field which combines computer science and robust datasets to enable problem-solving.

Cash flows: A measure of how much cash a business generates after taking into account all the necessary expenses, including net capital expenditures.

Dot Plot: A chart based on the economic projections of the Federal Reserve board members that illustrates their views on the appropriate pace of policy firming and provides a target range or target level for the federal funds rate.

Empire State Manufacturing Survey: The monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York.

Federal Reserve (Fed): The Federal Reserve System is the central banking system of the United States.

Gross domestic product (GDP): The sum total of all goods and services produced across an economy.

Growth stocks: Stocks whose share prices are higher relative to their earnings per share or dividends per share. Investors are willing to pay more because of their earnings or dividend growth expectations going forward.

University of Michigan Consumer Sentiment Index: A consumer confidence index published monthly by the University of Michigan. The index is normalized to have a value of 100 in December 1966. Each month at least 500 telephone interviews are conducted of a contiguous United States sample. Fifty core questions are asked.

Past performance is not indicative of future results. You cannot invest in an index.

Professor Jeremy Siegel is a Senior Investment Strategy Advisor to WisdomTree Investments, Inc. and WisdomTree Asset Management, Inc. This material contains the current research and opinions of Professor Siegel, which are subject to change, and should not be considered or interpreted as a recommendation to participate in any particular trading strategy, or deemed to be an offer or sale of any investment product and it should not be relied on as such. The user of this information assumes the entire risk of any use made of the information provided herein. Unless expressly stated otherwise the opinions, interpretations or findings expressed herein do not necessarily represent the views of WisdomTree or any of its affiliates.

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