The real economic indicators are holding at a moderate rate, says Wharton's Jeremy Siegel

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Siegel는 연준이 25bp 인하를 하겠지만 50bp는 소매판매가 매우 나쁠 때만 가능하다고 봄. 실물지표는 완만한 성장 유지 중이며, 연준금리는 중장기적으로 3.5~3.75% 수준까지 내려가야 한다는 입장. 시장의 2025년 6월까지 약 9회 인하 반영은 리스크 프리미엄이 과하다고 평가하며 7회 정도로 추정. 연준 인하 자체는 긍정적이나 과도한 낙관은 경계.

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01. it takes us to our talk of the tape, does the market have it right that the Fed can go big with its first easing move without sounding an alarm about the economy, and with stocks not far from all-time highs? And would such a move be right on time, or maybe a bit too late? Let's ask Wharton School Professor Jeremy Siegel. But first, Professor, great to have you here. I do want to first have you listen to what hedge fund giant John Paulson said. He spoke with my colleague Sarah Eisen in a rare interview this morning about what he thinks the Fed should do at next week's meeting.

02. "Personally, I think the Fed is a little behind the curve. Rates are five and a quarter plus, and inflation's down to the 2 and a half percent rate, so we have almost 3% real interest. So I think they've seen enough data, and they can start bringing rates down, and I would suggest more aggressively would be better. So I'd be for a 50 basis point cut rather than 25."

03. Professor Siegel, what's your take on that, and on the Fed's calculus going into next week?

04. I agree 100%, but I don't think they will. It would have to be a really bad retail sales report early next week for them to do 50. As you know, I've been for these aggressive cuts, but the deliberateness of Powell is 25 basis points. One interesting thing, it is almost incredible: the Fed funds futures that reflect the June meeting next year, June 2025, are now trading at 3%. That is actually more than nine cuts under the current level. Now, I think there's risk premium in there, and I've taken out some of that risk premium. I estimate seven cuts. What's interesting is there are exactly seven more meetings between next week and the June meeting of 2025. So a 25 basis point cut at each and every meeting would bring us down to around three and a half to three and three-quarters, and I've said that's where the funds rate should be, between three and a half and 4%.

05. Well, what's interesting about all that is, as you say, the market sometimes over-extrapolates or builds in some kind of "what if" premium into the Fed funds futures. The other piece, though, and this is in the last day or two, is the Wall Street Journal article and an FT article leaning in the direction of 50 basis points. These former Fed officials were giving voice to the idea that they could see the case for a half-percentage-point move next week. Loretta Mester, former Cleveland Fed president, has said as much, as did Bill Dudley, former New York Fed president, today. It seemed to me the market was willing to trade higher on that, in part because it seemed to lay the groundwork for a half point not being a response to outright weakness in the economy. In other words, we can have it all: we can have a resilient economy and get started on this easing cycle in a bigger way. Does that make any sense?

06. Yeah, it does, but I know Loretta very well. Notice that phrase, "a case could be made." She was really quite hawkish during those early phases of Fed increases. So that's certainly something that makes news, but I think there are a lot of "could be" made. Austin Goolsbee is definitely making the case that we should be more aggressive, and there will be a side on that, but I just don't think the PPI and CPI were that good. Again, it would have to be a really horrible report. Don't forget, the real indicators are holding at a moderate pace in the economy. I say let's get down to where we should be as fast as possible. But what I think the market is saying is that it may be a few months longer before we get to where we have to be. But if by the middle of next year we're at a 3 and 1/2% funds rate, hey, I'm good with that.