Jeremy Siegel, Wharton School prof and Director of Wisdom Tree ETFs, says "Now that it's clear the recession will not turn into a depression, stocks are poised for a recovery." Siegel recently was the subject of an interview conducted by Knowledge@Wharton. You may listen by clicking the player below, or read the edited transcript of the interview below.
Click Play to Listen:
http://knowledge.wharton.upenn.edu/audio/KW_Siegel20090624.mp3
Here is an excerpt:
Knowledge@Wharton: The market just had its first weekly [decline] in a number of weeks. What was driving that?
Siegel: I think there are two principal concerns in the market. One is the rising commodity prices -- particularly energy prices and oil. And the other is the rising interest rates, which are in turn caused by fears of huge deficits, as well as rising commodity prices. My feeling is, the market would have been up last week, too, if it didn't have to contend with those. And now, it's concerned that those [factors] might push the economy down. Today [June 22], we had a decline in energy prices and in the market. But ... energy prices and interest rates [are] our main concerns.
Knowledge@Wharton: Are the energy prices being driven by demand?
Siegel: Demand in China is rebounding very rapidly, although there are some experts who say that there's still a lot of speculation in it, and that the price ... has run a little bit ahead of itself. But China and India are recovering quickly. There are a record number of applications for new cars in China, and those generally use gasoline and oil. So, looking forward, over the next couple of years, those bulls in oil are saying there's going to be a big increase in [consumption].
Knowledge@Wharton: Doesn't the rise in demand [indicate] an improving economy overall?
Siegel: Certainly ... a good part of the rebound in oil and in interest rates is because the depression scenario has basically been taken off the record. It's now considered an extraordinarily low probability. So, we're dealing with a severe recession, and [the question of] how fast we are going to improve from that. And once you're into that mode, you don't accept 2% to 3% bond rates any more, and oil won't stay down at $35 a barrel. But I think some of [the movement has occurred] in anticipation of strong demand from China, particularly for oil, and, on the bond side, from the huge deficits, trillion-dollar-plus deficits that are going to cascade down on the market.
You may read the whole transcript here.
Source: Jeremy Siegel: 'The Market Will Stage Another Recovery', Knowledge@Wharton, June 24, 2009
