Tags: jeremy siegel market is facing two big uncertainties this year

Jeremy Siegel: Midterm Elections Are Big Uncertainty for Markets

(Matt Rourke/AP)

By    |   Friday, 04 May 2018 10:04 AM

Investment guru Jeremy Siegel warns savvy investors that one of the big question marks for the financial market this year is the midterm elections.

The other big unknown is how much the Federal Reserve will raise interest rates, the University of Pennsylvania Wharton School finance professor warned CNBC.

Siegel says he believes four rate hikes are already baked into the market.

Siegel said the expectation is the Democrats are going to win the House, which is now controlled by Republicans. If that happens, there's concern about the ability to push through more of President Donald Trump's agenda. There's also the possibility of impeachment proceedings against Trump, CNBC.com reported.

However, the GOP also currently controls the Senate, CNBC explained.

"If the Republicans take the Senate, there's not going to be a conviction [on impeachment]. There is not going to be a reversal of these tax cuts. There's going to be no reversal of the Republican position," Siegel said.

"They need the presidency, the Senate and the House. That can't happen for another two and a half years. So some of those dangers are delayed," he added.

To be sure, Siegel isn't alone in his warning to investors.

For his part, former Federal Reserve Chairman Alan Greenspan said the nation's fiscal system is "out of whack," and the recent huge omnibus spending bill and growing interest rates are slowing the economy while creating a "false dawn,"

"We are moving toward stagflation," Greenspan, who served as chairman from 1987 through 2006, recently told Fox Business' Maria Bartiromo on "Mornings with Maria." "In the process of moving in that direction, it feels good, but it's a false dawn."

The economy is currently reaping rewards from Trump's tax cut bill and his regulatory rollbacks, but Greenspan warned the nation deficit is growing.

"The fiscal system is out of whack," Greenspan commented. "While I approve wholeheartedly of the corporate tax cut and deregulation, the corporate tax cut unquestionably causes the deficit to rise, and we are not funding it by other means."

Without that funding, he added, "productivity cannot grow and accelerate."

Meanwhile, the economy is already slowing down, despite impressive first quarter numbers, the economist said.

"Everyone has been explaining for a long period of time, the seasonal adjustments for the first quarter tends to push the GDP growth rate down, but the critical issue is that the longer term does not exhibit a particularly powerful GDP growth rate," Greenspan explained.

"All of the major analysts who look at the data in the future, including the CBO [Congressional Budget Office] and the Fed and all see this as a slowdown, quite significantly, where it's been at the 3 percent to four percent range for a goodly part of the post-World War II period."

He said he does agree the tax cuts, specifically for corporate taxes, and deregulation have been "very positive forces" that are starting to show an impact.

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Investment guru Jeremy Siegel warns savvy investors that one of the big question marks for the financial market this year is the midterm elections.
jeremy siegel market is facing two big uncertainties this year
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2018-04-04
Friday, 04 May 2018 10:04 AM
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