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Well, and great to have Professor Jeremy Siegel back with us for our monthly conversation on the state of the economy and more. Jeremy, emeritus professor of finance at the Wharton School and also a senior economist at WisdomTree. Jeremy, good to see you again. How are you, sir? I'm good here at the end of this summer period.
I guess next time we meet might be fall. Exactly right. All right. So a couple of big things to discuss. And as we're taping this interview, the U .S. has just announced 50 percent tariffs on a variety of Canadian products. The relationship between the two countries is up and down. Give us your thoughts on the impact and the benefit or lack thereof of making a move like this.
Well, I think the relationship is down and down. I don't see that hasn't been much up. You know, as you know, I've been very anti-tariff from the beginning. I think it was a ridiculous program. It has not brought back any manufacturing jobs whatsoever. It has increased prices for American consumers.
I think the threats and statements against Canada, especially at the early part of his term, were very alienating. And there's a lot of bad feeling where in the past been good feeling that should should not be there. I mean, there were these little details. And I think that Carney thought that he could curry some political favor and not favor, but political points.
And in fact, early polls showed that three to one Canadian supported this move, even though it's going to hurt Canada far more than the United States. Now, I think a deal will eventually be met and go down and all that. But, you know, it's it's it's it's part of a pattern that Trump has pursued since the beginning of his second term.
But from an economic and maybe even a historical perspective, take a moment and talk about the importance of having to whatever level the investment is, but having that relationship from a trade perspective with not only Canada, but Mexico as well. Yeah, well, you know, you know, Mexico and Canada are like our biggest trading partners and, you know, are critical.
And don't forget that there were big tariffs that were threatened at the beginning of this term, and then they got worked down. This is another big threat. Well, and I think it will also be worked down to a level I mean, around the rest of the world. And we got about a 10 percent tariff. Of course, that's after the Supreme Court, you know, nullified his first round.
But the second round, particularly upsetting is that 50 percent hearkens back to the 1930 Tariff Act, which is called the Smoot-Hawley Tariff, which Republicans have always said is one of the worst pieces of legislation ever passed. Well, here it is, Donald Trump, a Republican, using that legislation of nearly 100 years ago.
I guess maybe one of the biggest questions from the past couple of weeks has been about the bond market and the run that yields have been on. What's been your reaction there? Well, there's so many things going on, as you know. I have been and I've spoken out. I was not in favor of Besson's, Secretary Besson's move to try to pump up the 30-year bond by buying some of that back.
I let the market determine. I don't think it was an unruly market at all. Wheels are going up because, you know, inflation has not been settled and fiscal requirements are getting higher and higher. Deficits are not looking favorable for the U .S. and the U.S. investors and the rest of the world are demanding increasing premiums.
And by the way, I've said this for 30 years. The only way you're going to get Congress to do anything about the deficit is if the long bond goes up to a level that hurts. Now, unfortunately, and I'm talking here about the 10-year, four and three quarters is not a level where the bond where the bond market hurts.
It's got to be over five, five and a half. But then that'll be an uncle position where the government's going to have to act. And we know they're going to have to act on Social Security because in three or four years it runs out and they're going to have to do something about that because they're not going to cut benefits by 30%.
So, I mean, there is there is a natural deadline. But even before that, there's got to be fiscal action. But yeah, I mean, those bonds are essential signals that investors are not happy with the future path of deficits in the United States. Yeah. So what kind of impact might they move like the buybacks have on the.
Minimal. And it was washed out almost a day afterwards. You know, the market is far more important than, you know, four billion dollars or eight billion dollars that's put in. I think you should save your ammunition for real crises. This was not a real crisis in any sense. I mean, you know, the problem is when you, you know, when you when you, you know, and especially when it seemed not to have succeeded.
Yeah. You know, I think Besson is a good man. I like him as secretary. I mean, he's a he's a he's a he's often a stabilizing force in the Trump administration. And I've agreed with almost all the positions that he has taken to moderate some of the more extreme positions of Trump. But this is one thing where I thought was wrong.
I don't think it's fatal. I don't. You know, when people ask me, how important is this over the next two or three months? Not that important. I mean, you know what war says on Friday and. Yeah. Is more important what the Fed does is more important what happens in Iran and what happens in oil and what happens to China and their response to that.
These are far, far more important than Besson's buyback of the 30 year bond. And with all of that, the equities markets, Wall Street is still hanging in there for the most part. It is. Hey, it is absolutely hanging in. And I'm particularly at a, you know, at a calendar time that is usually difficult for them.
The end of August got one more week to go here. But yeah, because basically earnings are great. I mean, and, you know, the hyperscalers, I mean, earnings have been blowout. No one expected this great earnings. So that's offsetting the higher yields and the other uncertainties. Although, you know, it is true.
I mean, the market hit a high, particularly the Nasdaq several months ago. And I'm trying to think what is going to propel it to new all time highs. I mean, I mean, obviously, if we could open Hormuz, which is a long shot, that would be a big, you know, shot in the arm. But very honestly, I'm trying to think what else before the midterms would send the market to certain all time highs.
I don't know. At that particular point, you know, the economy is still very strong. Employment is low. You know, there's nothing that looks like there's any particular cracks at this moment that would, you know, sharply threaten equities. But again, they hit their highs and particularly the, you know, the Mag 7 and tech and Nasdaq.
And they've been limping along, not quite able to. I like to, if you're technical, you want to see them break through that high. And until they break through that high, I would say that there could be some more downside movement. Right. The tech stocks themselves have done just a kind of an incredible run, obviously, over the last few years.
But when you talk about the last couple of weeks, it's been very interesting to watch, especially the ones that are tied to AI, because they, seemingly, there's more and more focus on the money that is being spent or the companies want to spend on building out the AI. Yeah. I mean, there's a big question.
I mean, that's why, you know, you get companies like Nvidia selling for 20 times earnings, 18 times earnings, but, you know, growing at 80 to 100 percent a year. I mean, that's it's incredible because there's all these uncertainty. You have Walmart selling at 40 times and 45, you know, can't match the earnings, you know, any which way to Nvidia.
But, you know, all those uncertainties is one reason why the price of these companies are not crazy. I mean, at all. So they recognize those uncertainties. We don't have I mean, Tesla and SpaceX are two companies that are really, you know, built on hope of the future. Sure. But you move into the others.
They're there. So many of them are priced lower than many of the other companies in the S &P 500. Is there anything then within kind of the scope of everything that has occurred since we last talked to you or maybe even over the last few months that has you changing your mind on what we'll see with interest rates in the next couple of months?
I don't think that Walsh is going to raise interest rates because of the midterms coming up in November. He has two more meetings and I think he politically would not be able to raise rates then. But if the war goes on and if oil stays up or goes higher, I think you'd start seeing those interest rates rise in December after the midterms.
Jeremy, great to talk to you as always. We'll catch up again next month. Thank you very much, Dan. You got it. Jeremy Siegel, Wharton Finance Professor Emeritus and also Senior Economist at Wisdom Tree.
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